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NO.  94-821 82 


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Author: 


Thurber,  Francis  Beatty 


Title: 


The  relations  of  railroads 
to  the  public 

PI3.C6' 

[Washington,  D.C.] 

Date: 

[1 879] 


qq-S^/^P-V 


MASTER   NEGATIVE  # 


COLUMBIA  UNIVERSITY  LIBRARIES 
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Thurber,  Francis  Beatty,  1842-1907. 

The  relations  of  railroads  to  the  public.  A  statement 
prepared  by  F.  B.  Thurber,  esq.,  of  New  York  city,  in 
reply  to  inquiries  submitted  to  him  by  the  chief  of  the 
Bureau  of  statistics.,  Washington,  D.  C.     rWashinerton, 

1879] 


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1.  Bailroads— U.  S.— Rates.    2.  Railroads— New  York  (State)        i.U.  S. 
Bureau  of  statistics  (Treasury  dept.)    ii.  Title. 


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EELATIONS  OF  EAILROADS  TO  THE  PUBLIC. 


A    STATEMENT 


PREPAllED  BY 


F.  B.  THURBER,  ESQ ,  OF  NEW  YORK  CITY, 


IN  REPLY  TO 


INQUIRIES  SUBMITTED  TO  HIM  BY  THE  CHIEF  OP  THE  BUREAU 

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THE 


EELATMS  OF  RAILROADS  TO  THE  PUBLIC. 


A    STATEMENT 


PKEPARED  BY 


F.  B.  THURBER,  ESQ.,  OF  NEW  YORK  CITY, 


IN  REPLY  TO 


INQUIRIES  SUBMITTED  TO  HIM  BY  THE  CHIEF  OF  THE  BUREAU 

OF  STATISTICS,  WASHINGTON,  D.  C. 


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INFORMATION  FURNISHED  BY  MR.  F.  B.  THURBER,  OF  NEW  YORK,  IN 
REGARD  TO  DISCRIMINATIONS  IN  RAIL  RATES  AGAINST  THAT  CITY, 
THE  LINE  OF  POLICY  PURSUED  BY  THE  NEW  YORK  TRUNK  LINES, 
THE  OPERATIONS  OF  THE  WEST-BOUND  APPORTIONMENT  SCHEME  OF 
NEW  YORK,  TERMINAL  CHARGES,  AND  THE  RAILROAD  PROBLEM  OF 
THE  COUNTRY,  WITH  A  STATEMENT  IN  REGARD  TO  THE  INFLUENCE 
OF  CAPITAL  TOWARDS  DETERMINING  THE  COURSE  OF  COMMERCE,  IN 
REPLY  TO  INQUIRIES  ADDRESSED  TO  HIM  BY  THE  CHIEF  OF  THE 
BUREAU  OF  STATISTICS. 

N.  B. — ^The  following  inquiries  were  originally  addressed  to  Mr.  Thurber  in  May, 
1878,  and  his  reply  was  dated  May  21,  1878.  He  has,  however,  revised  the  whole  and 
returned  it  to  this  office  under  date  of  June  13,  1879. 


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INQUIRIES  ADDRESSED  TO   AND   ANSWERS   FROM   F.    B.    THURBER,    OF   NEW  YORK. 

Question  1.  Do  you  regard  the  establishment  and  maintenance  of  lower  rates  be- 
tween ports  in  Europe  and  points  in  the  interior  of  the  United  States  than  the  com- 
bined ocean  rate  from  the  foreign  port  to  New  York,  and  the  railroad  rate  from  New 
York  to  the  interior  point,  as  in  the  nature  of  an  unjust  discrimination;  and,  if  so,  what 
measures,  in  your  opinion,  should  be  adopted  for  preventing  it  ? 

Answer.  I  regard  the  establishment  and  maintenance  of  lower  rates  between  ports 
in  Europe  and  points  in  the  interior  of  the  United  States  than  the  combined  ocean 
rate  from  the  foreign  port  to  New  York  and  the  rail  rate  from  New  York  to  the  interior 
points  as  an  unjust  discrimination,  for  the  reason  that  the  two  methods  of  transportatioa 
are  entirely  8ei)arate  and  distinct  from  each  other,  bulk  having  to  be  broken  and  the 
goods  handled  at  the  end  of  the  ocean  voyage  in  any  event.     There  can  be  no  more 
economy  of  transport  by  making  a  through  rate  in  Liverpool  to  Chicago,  via  New 
York  or  any  other  port,  than  there  is  in  making  the  ocean  rate  separately  and  allowing 
the  railroad  lines  to  make  the  rate  from  the  seaboard  to  Chicago.     This,  of  course,  is 
under  the  supposition  that  in  both  cases  the  goods  are  transferred  from  the  ship  to  the 
car  in  the  same  manner,  whether  on  a  through  bill  of  lading  or  not.  In  1877,  from  January 
until  September,  through  freights  from  Liverpool  to  the  West  on  fourth-class  goods  were 
carried  at  l^shilliTigs  and  sixpence  net  per  ton,  equal  to  13f  cents  per  hundred  pounds, 
to  Chicago,  and  14  to  15  shillings  net,  or  15^  to  16|  cents  per  hundred  pounds,  to  Saint 
Louis ;  w  hile  at  the  same  time  ocean  freight  rates  to  New  York  alone  from  Liverpool 
were  12  shillings  and  sixpence  and  10  per  cent,  primage  for  the  same  goods  per  ton; 
or,  in  other  words,  New  York  merchants  were  charged  10  per  cent,  more  for  the  car- 
riage of  the  same  goods  from  Liverpool  to  New  York  than  Chicago  merchants  were 
""^   charged  for  taking  the  same  goods  (through  New  York)  1,000  miles  further ;  the  effect 
OI  of  this  being  to  forcibly  and  abruptly  take  from  the  merchants  of  New  York  trade 
,_^  which  naturally  belonged  to  them  and  give  it  to  the  merchants  of  Chicago.     I  do  not 
think  that  any  common  carrier  has  the  right  to  thus  abrogate  or  be  a  party  to  abro- 
gating the  natural  advantages  which  a  community  may  enjoj'.     Such  practices  un- 
questionably make  investments  uncertain,  discourage  legitimate  business  enterprise, 
and  should  be  prohibited  by  law.     Discrimination  of  this  kind  is  a  protection  of  for- 
eign manufactures  against  home  manufactures ;  for  instance,  the  hardware  manu- 
facturers of  Birmingham  and  cotton  manufacturers  of  Manchester  can  lay  down  their 
products  in  our  Western  markets  chea4)er  than  the  manufacturers  of  the  Eastern  States 
can.    The  former  owe  no  allegiance  to  our  government,  pay  no  taxes,  and  are  com- 
mercial "car|)et-baggers";  the  latter  are  American  citizens,  and  are  entitled  to  fair 
treatment.     The  above  is  an  examjde  of  the  constantly-recurring  anomalies  in  com- 
merce at  the  present  time,  resulting  from  the  control  of  steam-power  by  large  organ- 
izations of  capital,  and  which  must  be  regulated  in  the  interest  of  the  public  unless  we 
would  build  up  class  distinctions  and  perpetuate  a  moneyed  aristocracy.     I  would  pro- 
hibit such  practices  by  State  and,  if  necessary,  by  national  laws,  against  charging 

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more  for  the  carriage  of  freight  for  a  less  than  for  a  greater  distance,  except  where 
the  principle  of  rednced  cost  entered  into  the  (inestion,  an<l  this  is  not  the  castMn  the 
instance  above  given.  It  nuist  not  he  confounded  with  the  j)ro  rata  principle  in 
land  transportation,  because  in  this  the  principle  of  cost  does  enter  largely  into  the 

question.  .  ■•        ,  i.  m.    i 

Question  2.  Do  von  consider  that  the  discriminations  above  mentioned  have  resulted 
from  competition  "between  ocean  lines  in  connection  with  the  New  York  Central,  the 
Erie,  the  Pennsylvania,  and  the  Baltimore  and  Ohio  Kailroads,  or  that  they  are  the 
result  of  the  etlVirts  of  those  roads  to  meet  rates  made  by  the  steamer  lines  in  cimnec- 
tion  with  the  Grand  Trunk  Railroad,  and  its  connecting  lines  from  Montreal,  Port- 
land, ami  Bostcm  ?  IX    i^xl        «•     A 

Answer.  I  understand  the  above  discrimination  to  have  been  the  result  ot  theettort* 
of  the  trunk  lines  to  meet  rates  made  by  the  steamship  lines  in  connection  with  the 
Grand  Trunk  Railroad  and  its  connecting  lines  from  Montreal,  Portland,  and  Bos^en. 

Question  X  Is  it  not  true  that  the  average  steamer  rates  which  prevail  between  New 
York  and  Liverpool  are  less  than  those  which  prevail  between  Boston  an<l  Liveri)oo^ 
or  between  Philadelphia  and  Liveri»ool,  or  Baltimore  and  Liverpool? 

Answer.  Average  steamer  rates  between  New  York  and  Liverpool  are  generally  lower 
than  between  other  seaboard  ports,  the  reason  for  this  being  that  in  many  respects- 
New  York  is  a  more  desirable  port ;  the  principal  reason  being,  perhaps,  that  it  is  more 
accessible,  and  freights  both  wavs  are  more  easily  obtained. 

Question  4.  Referring  to  the  results  of  the  recent  discrimination  in  rates  as  against 
New  York  and  in  favor  of  Boston,  which  prevailed  during  the  year  1878,  leading  to  a 
large  diversion  from  New  Y'ork  to  Boston,  please  to  state,  with  as  much  particularity 
as  von  may  be  able,  the  principal  commodities  or  classes  of  commodities  thus  diverted, 
statin"  whether  they  were  of  domestic  or  of  foreign  production  ;  if  of  American  pro- 
duction, in  what  State  or  States  produced,  and  if  of  foreign  i>roduction,  of  what  countries 
thev  are  the  product.  It  is  the  object  of  this  in<iuiiy  to  ascertain  as  nearly  as  possible 
the^nactical  ettect  of  such  discriminations  against  New  Ytuk.  Y'ou  may  elucidate  the 
subject  in  any  manner  you  may  deem  proper,  if  you  do  not  think  a  specific  answer  to 
the'iniiuirv  will  properly  bring  out  the  facts  in  the  case. 

Answer.'  There  has  generally  been  a  small  permanent  discrimination  in  west-bound 
rates  a^-^ainst  New  York  and  infiivor  of  Boston,  owing  to  the  fatt  that  the  Grand  Trunk 
is  consfdered  a  less  desirable  route  by  which  to  ship  goods,  and  consequently  in  order 
to  get  business  it  has  to  ofter  inducements  in  the  way  of  a  lower  rate.  When  this  in- 
ducement has  been  small  it  has  principally  atfected  the  heavier  and  least  valuable  class 
of  ^-^oods  but  when  rates  are  much  less,  as  they  have  been  several  times  (the  last 
inst^ance  being  in  Januarv,  1878),  the  ditlerence  has  been  so  great  that  almost  all  classes 
of  troods  have  been  equallv  atfected,  and  not  only  were  goods  shipped  from  N»^w  York 
to Bostonandfrom thence  to  Chicago,  by  the  way  ()f  the  graiid  trunk  line,./or/e«.s//*r(« /m// 

the  \eic  York  rates,  but  goods  were  shipi)ed  from  New  York  to  Boston  and  back  again 
throu'^h  New  York  over  the  Erie  road  to  Chicago  at  rates  far  b«'low  those  ruling  irom 
New  York.  As  to  whether  the  goods  thus  atfected  were  mostly  of  foreign  or  domestic 
product,  I  should  say  perhaps  of  about  equal  amount,  foreign  goods  of  all  varieties 
used  in  the  West  as  well  as  goods  manufactured  in  New  York  and  all  the  Eastern  States 
beincr  atlected.  As  you  state  in  this  question  that  the  object  is  to  ascertain  as  nearly 
as  possible  the  practical  etfect  of  the  recent  discrimination  against  New  York,  I  would 
add  that  the  damage  occasioned  by  these  anomalies  in  our  transiiortatiou  system  is. 
not  confined  to  the  actual  number  of  tons  of  freight  carried  out  of  Boston  during  the 
period  when  rates  are  less,  but  there  is  also  a  substantial  injury  done  to  the  prestige 
of  New  York  as  a  commercial  center,  and  in  the  general  shaking  up  and  disturbance 
which  thev  occasion  in  the  settled  channels  of  trade. 

Question  5.  In  view  of  the  fact  that  New  York  City  is  practically  the  trade  center 
of  a  verv  laro-e  inoportion  of  the  manufacturing  enter]»rises  of  the  New  England  States, 
do  vou  iiot  consider  that  the  commerce  of  New  Y'ork  from  these  sources  is  largrly  pro- 
moted by  the  low  rail  rates  on  Western  productions  over  the  New  York  Central  Railroad 
and  its  connections  to  the  towns  of  New  England,  and  by  the  low  rates  tor  the  trans- 
portation of  the  manufactured  products  of  the  New  England  factories  to  all  points  at 
the  West  and  Southwest  over  the  same  roads  ? 

Answer  I  think  that  the  business  of  N<'W  York  is  promoted  by  equitable  rates  from 
the  West  to  the  New  England  States  and  from  the  New  England  States  to  the  West,  as, 
unnuestionablv,  New  York  shares  to  a  greater  or  less  extent  in  the  prosperity  of  New 
Enffland  •  but'l  do  not  think  that  this  is  any  reason  why  New  England  should  have  a 
lower  rate  of  carriage  than  New  York,  or  even  as  low,  because,  laying  aside  the  infiu- 
ence  of  distance  on  through  business,  the  volume  of  business  d(me  at  New  York  entitles 
her  to  lower  rates  of  transportation  than  any  other  seaboard  city.  It  is  well  known 
that  the  cost  of  transportation  bv  rail  decreases  faster  as  the  volume  of  business  in- 
creases than  the  cost  of  doing  any  other  business;  or,  in  other  words,  a  large  business 
in  transportation  can  be  done  cheaper  in  proportion  than  a  Jarge  business  m  almost 
any  other  branch  of  commerce. 


REPORTS    OF    EXPERTS.  O 

Question  6.  Please  to  present  such  facts  as  may  appear  to  yon  to  be  of  value  in  order 
to  indicate  the  nature  and  extent  of  the  discriminations  made  in  tiivor  of  jobbing  iner- 
chants  at  interior  points  on  shipments  from  New  York,  and  explain  how  such  discrimi- 
nations operate  with  respect,  first,  to  the  interests  of  small  purchasers  in  the  interior; 
second,  to  the  commercial  interests  of  New  York,  and,  third,  to  the  interests  of  the 

transportation  line.  ^       ,,  .i         •     •     i       i       i 

Answer.  It  has  been  the  practice  for  a  number  of  years  for  all  the  principal  railroad 
lines  rJinning  from  New  York  to  the  West  to  make  special  contracts  with  wholesale 
houses  in  the'interior,  at  almost  all  principal  i)oints,  at  a  rate  far  below  their  printed 
schedule  of  rates,  which,  in  the  absence  of  agreement,  the  public  generally  have  to 
pay.  The  following  are  illustrations  of  the  great  difference  thus  made,  and  which  is 
by  many  believed  to  be  excessive : 

(Yrom  report  of  committee  on  railroad  transportation  of  the  New  York  Chamber  of  Commerce,  Febru- 
^  ^  ary  28,  1878.) 

''An  important  discrimination,  also,  against  the  jobbing  trade,  particularly  of  this 
city  is  in  the  form  known  as  the  special  contract  .vfstem,  by  which  wholesale  houses  in 
the  interior  are  given  rates  from  fifty  to  seventy-five  per  cent,  cheaper  than  the  gen- 
eral public ;  and  for  illustration  on  this  head  we  refer  to  annexed  schedule,  marked  E." 

Schedule  E.— Special  Contracts.—"  The  winter  schedule  rate  from  New  York  to 
Syracuse  is  50  cents  per  100  pounds  for  first-class  goods,  40  cents  for  second-class,  34 
cents  for  third-class,  and  23  cents  for  fourth-class,  and  these  rates  the  great  mass  of 
people  have  to  pav ;  but  a  few  favored  wholesale  dealers  in  Syracuse  are  given  con- 
tracts bv  which  ail  classes  of  goods  are  carried  for  12  cents  per  hundred  imunds,  as 
against  the  .50,  40,  34,  and  23  which  the  public  generally  have  to  pay,  and  the  same 
is  true  of  all  the  other  jobbing  centers  of  the  State.  The  same  principle  also  holds 
good  in  the  treatment  which  the  great  mass  of  the  people  of  the  State  of  lUiiuus,  and, 
indeed  all  other  Western  States,  are  forced  to  submit  to.  The  reduced  rates  of  the 
pooled'lines  to  Chicago  are  now  75  cents  per  hundred  for  first-class,  60  cents  for  second- 
class,  50  cents  for  third-class,  and  40  cents  for  fourth-class  (lately  $1,  80  cents,  60  cents, 
and  45  cents,  respectively),  while  favored  parties  have  been  given  contracts  running 
through  the  year  at  25  cents  per  hundred  on  all  classes." 

This  form  of  discriniination  atfects, —  ,         ^         ,       • 

First.  The  small  purchasers  in  the  interior,  virtually  prohibiting  them  trom  buying 
in  the  most  favorable  markets,  for  they  are  discriminated  against  so  largely  that  they 
are  obliged  to  stay  at  home.  -,  ^     -. 

Second.  The  coinmercial  interests  of  New  Y^ork  areunfavorably  a ftected,  for  its  mer- 
chants are  thus  obliged  to  sell  their  goods  to  the  wholesale  houses  in  the  interior,  who 
are  thus  favored  in  freights,  at  such  prices  as  they  may  see  fit  to  give.  Practically 
the  wholesale  houses  in  the  interior  are  subsidize<l  so  that  they  may  break  down  the 
wholesale  houses  on  the  seaboard  and  monopolize  the  trade  of  the  retail  merchants  of 

the  interior.  ^  ^ ,       ^v.    ^   ,    /.      .i 

Third.  The  interests  of  the  transportation  lines  are  unfavorably  affected,  tor  they 
are  virtually  concentrating  the  business  in  the  hands  of  a  few  wholesale  merchants, 
who  pay  them  very  low  rates,  instead  of  doing  business  with  a  large  number  of  smaller 
merchants  who  would  be  glad  to  pay  them  a  higher  and  reasonably  remnnerativo 
rate,  but  who  an;  prevented  from  buying  their  goods  in  the  seaboanl  markets,  as  they 
used  to  do,  by  the  prohibitory  rates  which  are  maintained.  The  passenger  traffic  of 
the  roads  is  also  greatly  injured  by  this  practice,  as  the  larger  the  number  of  mer- 
chants who  do  business  with  the  seaboard  business  centers,  the  larger  would  be  the 
number  of  busim'ss  men  travelling,  and  I  therefore  believe  it  not  only  to  be  an  unjust 
discrimination  against  the  interest  of  the  wholesale  merchants  on  the  seaboard,  but 
also  against  that  of  the  smaller  purchasers  in  the  interior,  and  of  the  roads  them- 
selves? While  I  do  not  think  it  feasible  or  right  to  require  common  carriers  to  trans- 
port a  small  quantin  of  goods  as  cheaply  as  they  would  a  larger  iiuaiitity,  yet  I  be- 
lieve with  Mr.  Fink,  that  a  car-load  should  be  the  maximum  ciuantity  required  to 
secure  the  lowest  rate,  and  I  believe  further,  that  shippers  of  less  than  a  car-load  should 
only  be  chanjcd  the  additional  rate  which  it  costs  to  transport  goods  in  smaller  quantities.  It 
is  unqucstionabhf  true  that  the  qreat  mass  of  the  people  hare  been  charged  a  mueh  higlur  pro- 
portionate rate  than  theif  should  hare  been  charged,  in  order  that  an  unreasonably  low  rate 
could  be  ffiren  to  a  few  farored  individuals.  I  believe  that  the  equitable  adjustment  of  this 
matter  is  of  greater  importance  than  almost  any  other  single  defect  in  our  transportation  sys- 
tem, and  it  should  receive  the  careful  examination  of  experts  in  order  to  determine  what  addi- 
tional rate  it  costs  to  receive,  transfer,  and  deliver  quantities  less  than  a  car-load  as  compared 
with  a  car-load,  and  then  ivith  this  light  an  equitable  adjustment  should  be  made. 

Question  7.  In  what  manner  and  to  what  extent  are  the  interests  of  trade  injuriously 
aflfected  by  sudden  and  unadvertised  changes  of  tariff'  rates  ?  In  your  opinion,  how  long 
should  any  proposed  change  in  a  tariff"  sheet  be  advertised  prior  to  making  the  changes  1 
Answer.  Sud«len  and  unadvertised  changes  in  the  rates  for  transportation,  it  tre- 
quent,  are  unquestionably  injurious,  as  it  makes  commerce  somewhat  of  a  lottery,^ 
and  it  would  probably  be  more  beneficial  to  trade  interests  if  changes  m  the  rates  ot 


I     -^ 


^. 


4  APPENDIX. 

transportation  did  not  take  place  more  frequently  than  twice  per  year.  I  have  not  fully 
considered  the  question  of  how  long  a  notice  ought  to  be  given  m  any  contemplated 
chancre  in  rates,  but  am  under  the  impression  that  ten  days  would  be  a  reasonable  period 
for  such  notice.  This  would  usually  prevent  loss  to  shippers  on  contracts  wnich  had 
been  taken  based  on  ruling  rates,  and  would  not  be  so  long  as  to  embarrass  tor  any 
considerable  period  the  traffic  of  the  roads  by  withholding  shipments  in  case  ot  a  con- 
templated decline  or  hurrying  them  forward  in  case  of  a  prospective  advance. 

Ouestion  8.  In  your  opinion,  what  action,  legislative  or  otherwise,  is  necessary  m 
order  to  prevent  any  departure  from  published  rates  by  anyone  of  the  various  methods 

^  Answef.  It  seems  to  me  probable  that,  in  case  uniform  rates  to  all  shippers  undeT 
similar  circumstances  were  once  prescribed  by  law,  carriers  would  naturally  and 
easilv  fall  into  line  and  comply  with  the  law.  If,  however,  experience  should  prove 
that  there  were  many  ways  of  avoiding  the  law,  legislative  ingenuity  ought  to  be  able 
to  meet  these  evasions,  the  same  as  it  has  in  our  internal-revenue  laws  and  many 
other  laws  by  which  society  is  regulated.   ,,,.,.  .   .        „v^„i^  i:,„:f 

Ouestion  9.  Can  yon  formulate  a  general  rule  which,  m  your  opinion,  should  unit 
distriminations  in  freight  charges  in  so  far  as  relates  to  quantity  carried  f  Mr.  Albert 
Fink  has  expressed  the  opinion  that  this  discrimination  should  be  limited  to  single 
car-load  lots,  bevond  which  limit  an  absolute  uniformity  of  rates  should  be  observed. 

Answer.  I  think  that  the  line  as  drawn  by  Colonel  Fink,  at  the  quantity  of  one  car- 
loatl  is  perhaps  the  first  practicable  step  to  be  taken  in  equalizing  charges  tor  trans- 
portation ;  but,  as  stated  in  answer  to  question  6,  Colonel  Fink  does  not  go  far  enough 
in  this  direction  to  do  justice  to  the  great  mass  of  shippers  who,  unquestionably,  are 
those  that  usually  ship  in  less  quantity  than  one  car-load.  The  probable  difference  in 
the  cost  of  transporting  merchandise  in  quantities  of  a  car-load  and  in  less  quantities 
should  be  ascertained  as  nearly  as  may  be  by  examination  of  the  question  by  experts, 
and  this  additional  cost  and  no  more  should  be  charged  to  such  shippers.  Ihe  prin- 
ciple of  ''equality  on  the  'King's  highway'"  should  be  here  applied  as  tar  as  possible. 
The  riffht  of  the  citizen  must  here  limit  the  operation  of  the  law  of  wholesale  and  re- 
tail: the  vote  of  the  small  shipper  had  as  much  to  do  with  conferring  the  franchises 
nnder  which  railroads  are  operated  as  did  that  of  the  large  shipper,  and  from  this  point 
of  view  he  is  entitled  to  as  much  consideration.  ^    ^  r»         i-    f  n^.^r»^.^r.  «f 

Question  10.  Referring  to  the  second  proposition  on  page  6  of  Report  ot  Chamber  ot 
Cmumerce  Committee  on  Railroad  Transportation,  please  to  state  what  general  or 

special  remedv  was  therein  contemplated.  ,     ^,    .    -i-  „.!..„ 

Answer  That  touched  upon  in  answer  to  question  1,  namely,  that,  if  necessarv,  leg- 
islation must  be  invoked,  not  only  at  New  York,  but  at  all  the  ports,  to  remedy  this 

*^^  Oue«tioii"n!'  Do  von  regard  the  recent  discrimination  in  rail  rates  in  favor  of  Boston 
as  a  measure  intended  by  the  railroad  managers  to  be  inimical  to  the  interests  of  New 
York  Citv  or  do  von  regard  such  discriminations  as  the  result  ot  a  contest  by  New 
York  roads  for  the  puri)ose  of  forcing  rival  roads  out  of  Boston  to  a  conformity  with 
the  established  New  York  rates  ?  .     „  j-  ^     ^ 

Answer.  The  recent  (1878)  discrimination  in  rail  rates  in  favor  of  Boston  was  un- 
ouestionablv  not  intended  to  be,  by  the  railroad  managers,  inimical  to  New  York  City, 
but  the V  were  the  result  of  attempts  by  the  pooled  trunk  hnes  to  force  the  Grand 
Trunk  Road  into  maintaining  a  higher  schedule  of  rates  than  the  managers  of  that 
road  saw  fit  to  maintain,  or,  looked  at  from  a  New  York  railroad  manager  s  standpoint, 
it  was  occasioned  by  attempts  to  meet  the  competition  of  the  Grand  Trunk  Road.  This, 
however  is  not  in  all  respects  a  fair  statement  of  the  case,  because  the  extreme  low 
rates  which  ruled  for  a  time  were  first  made  by  the  pooled  lines  as  a  punishment  to 
the  Grand  Trunk  Road  for  having  carried  at  much  higher  rates,  but  which  rates  were 
somewhat  lower  than  those  established  by  the  pooled  lines.  •     ,     i  „^„^„ 

Ouestion  12.  Please  to  present  a  statement  showing  the  relative  tenninal  charges 
at  Boston,  New  York,  Philadelphia,  and  Baltimore,  with  reference  to  certain  specifac 
commodities.  By  this  is  meant  the  terminal  charges  as  they  affect  particular  kinds 
of^mmodities  in  their  passage  through  New  York,  first  in  the  ^«'"-««  «/  ^Jf;  f' .^^^ 
second  bv  direct  transshipment.  In  this  connection  please  to  present  two  illustra- 
tions or  sets  of  illustrations  going  to  show  the  lelative  terminal  expense  at  Boston, 
New  York  Philadelphia,  and  Baltimore.  First,  on  commodities  imported  from  Europe 
and  to  be  shipped  directly  to  interior  points;  second,  on  commodities  P^'-^^ed  in  ware- 
house at  New  York  prior  to  shipment ;  third,  on  commodities  which  pass  through  the 

^  A^^wer.  TWs  question  is,  perhaps,  the  most  difficult  of  all  those  asked  to  answer 
intelli.'entlv,  and  it  is  almost  impossible  to  answer  it  comprehensively,  as  it  involves 
not  on!v  wh/it  is  known  as  terminal  charges,  but  the  whole  routine  of  commerce  at 
the  four  principal  seaboard  cities,  both  in  import  and  export  business,  and  m  order  to 
^ive  a  correct  idea,  it  would  have  to  embrace  all  the  principal  items  of  merchandise 
I  have  however,  consulted  with  a  large  number  of  prominent  merchants  in  different 


i'5 


REPORTS   OF   EXPERTS.  ^ 

branches  of  trade,  with  the  following  general  result :  as  regards  ships,  while  tlie  spe- 
cific charges  of  pi  otage,  towage,  wharfage,  supplies,  &c.,  vary  in  some  degree  at  the 
d  ffertS  po  ts,  tlK.re  are  corresponding  advantages  and  <^'«^t"''1-^^' Vw  Yorf  hf. 
equalize  each  other.  As  regards  the  terminal  charges  on  merchandise.  New  \ork  ha* 
;'  lie  past  been  at  a  disad^^antage  as  regards  .^rain  and  other  1-;^'!-, -"^iY^S  ^^^^^^ 
the  w4t  by  rail  and  destined  for  export,  and  also  on  the  heayn-r  kinds  of  imported 
goods  en  ro«f.  to  the  west,  for  the  economical  handling  of  which  it  was  necessar>^  to 
brinLr  cars  and  ships  together ;  but,  as  stated  elsewhere,  these  have  been  and  are  being 
remedied!  The  foregoTng  applies  more  especially  to  the  second  division  of  the  ques- 
rio  viz^vhere  goods  ha^ve  direct  transshipment  from  ship  to  car,  or  luce  verm  ;hnt 
as  regards  those  charges  upon  commodities  ''in  their  passage  through  New  \ork  in 
iTieSmar  course  of  trade  "  the  question  of  merch.tlhts'  profits  is  involved  and  this  is 
.nar  morl  importance  on  the  greU  miscellaneous  class  of  goods  than  the  mere  at- 
te,  ai  t  expenses,  such  as  cartage,  storage,  labor,  &c.,  which  do  not  ^^^^er  niater  ally 
in  the  different  seaboard  cities,  and  in  the  aggregate  amount  to  an  exceedingly  s  all 
ercenta-e  upon  the  cost  of  valuable  products.     On  this  great  miscellaneous  class, 

hTch  compri^ses  a  thousand  and  one  items,  New  ^'ork  possesses  «"l>«ta"tial  advan- 
ta"es  Most  of  the  large  raanutacturers,  both  foreign  and  domestic,  maintain  agen- 
cie's  here  tbr  the  sale  of  their  goods,  which  is  thus  done  upon  the  east  possible  margin 
of  profit;  varieties  are  more  extensive,  affording  the  best  possib  e  «f *^^t^«"' ;";^1;,«^« 
new  and  attractive  styles  are  first  shewn.  These  advantages,  ^^^th  the  aggregation  ot 
capital  which  has  settled  here,  have  resulted  in  attracting  ^^'^^^ l,l'^Zro^^eZ 
holding  in  a  much  greater  degree  than  couhl  have  been  expected  the  trade  ot  the  iia^ 
tC  "n  the  face  of  the  persistent  discriminations  which  have  been  ^.J^f^^X In  fZ 
York  bv  her  railroad  lines.  This  discrimination  has,  of  course,  resulted  greatly  to  the 
detriment  of  her  distributing  merchants,  who  have  had  to  relinquish  a  portion  of  their 
legitimate  profits  in  order  to  make  up  for  these  discriminations  and  to  offset  the  in- 
2cemeiits  offered  by  competing  cities.  In  conclusion  I  ^  ""\^\  ^'-^y,' ^f '{^  *^«,^X^^^ 
to  question  16,  that  there  has  been  some  misapprehension  and  too  l>r"ad  an  applica- 
rion  of  the  ag  tarion  by  the  citizens  of  New-York  for  improved  terminal  facihties,  as 
i  was  designed  principally  to  secure  improved  facilities  for  the  handling  ot  gram 
arriving  by  rail,  and  other  heavy  goods  for  which  direct  transshipments  from  ship  to 
car  and  from  car  to  ship  were  a  necessity.  .     , /.    -i-i.-        pxt^^ 

Question  13.  Please  to  state  generally  those  defects  in  the  terminal  facilities  of  New 
York  City  which  injuriously  affect  it,  in  so  far  as  relates  to  trade  in  which  New  lork 
competes  with  Boston,  Philadelphia,  and  Baltimore. 

Answer.  I  know  of  no  defects  in  the  terminal  facilities  of  New  York,  except  those 
heretofore  resulting  from  our  inability,  or  more  property  neglect,  m  bringing  cars  and 
ships  together;  this  applies  principally  to  the  handling  ot  grain  amving  from  th^ 
West  b^^rail  designed  for  immediate  export,  and  to  the  heavier  class  ot  imported  goods 
destined  for  consumption  in  the  West  upon  which  it  is  also  necessary  to  make  direct 
transfer  from  the  ship  to  the  car.  We  do  not  feel  the  first  during  a  great  part  of  the 
vear,  owing  to  the  superior  facilities  enjoyed  by  New  York  in  having  the  Erie  Canal, 
the  canal-boats  bringing  this  staple  being  at  once  towed  alongside  s^iP^  ^.J.^^:^^^!!^^* 
is  to  be  sent  abroad.  And  as  regards  impcnted  goods  destiiied  tor  the  W  «»*» /he  recent 
authorization  of  the  use  of  the  Belt  Line  of  railroad  which  runs  along  almost  the  entiie 
water  front  of  the  city  has  already  enabled  a  beginning  to  be  made  in  loading  these 
varieties  of  goods  directly  from  the  ships  upon  the  cars  without  cost  of  transfer  and 
the  full  utilization  of  these  facilities  will  place  New  York  upon  an  equality  with  all 

''''Question.'\4!^in  your  opinion,  has  not  the  rapid  diffusion  of  commercial  informa- 
tion bv  means  of  railway  postal  service  and  the  telegraph,  in  connection  with  the  pos- 
sibilitv  of  rapid  transportation  afibrded  by  railroads,  rendered  it  necessary  that  there 
should  be  at  every  citv  on  the  seaboard  an  immediate  contiguity  of  the  railroad,  the 
warehouse,  and  the  sea-going  vessels,  and  the  establishment  of  such  facilities  in  the 
way  of  mechanical  appliances  and  business  arrangements  as  will  insure  the  hmest 
possible  cost  of  transfer  from  one  vehicle  to  another f  In  this  ^'0""ection  wil  >ou 
please  to  state  how  far,  in  your  opinion,  the  facihties  furnished  at  New  \ork  fail  to 

meet  this  requirment?  ^  .  i .    /•         j.-      ^      i,^.«„+ixr 

Answer.  Unquestionably  the  rapid  diffusion  of  commercial  information  tends  gieatly 
to  equalize  values  in  difiereiit  commercial  centers,  and  in  ctmnection  with  the  possi- 
bility of  rapid  transportation  prevents  the  realization  of  large  profits  to  the  distribu- 
tor and  irreatly  reduces  prices  to  the  consumer.  In  consequence  of  this  it  has  become 
necessary  to  reduce  to  the  minimum  all  charges  upon  commeTce,  andthe  most  approved 
appliances  and  facilities  are  also  necessary.  As  to  the  defects  in  the  facilities  funiished 
at  New  York,  they  have  unquestionably  been  unduly  magnified.  In  enumerating  the 
defects  in  the  New  York  railway  system  many  persons  have  entirely  overtooked  tiie 
great  natural  advantages  enjoyed  by  New  York  in  her  magnificent  ^^rbor  and  exten- 
sive stretch  of  water  front,  which,  taken  in  connection  with  that  great  source  of 
wealth,  the  Erie  Canal,  has  sustained  the  commerce  of  New  York  under  the  discrim- 
ination  of  her  raikoads,  the  burden  of  bad  municipal  government,  and  the  enteri)risiug 


r^ 


b  APPENDIX. 

coinix'tition  of  otiier  seal)o;nd  citit's.  There  lias  heeu  a  jjreat  cry  that  what  New  York 
iu'e<led  was  elevators;  but  so  far  as  the  aj;itatiou  by  the  citizens  of  New  York  was 
couceriKMl  it  Avas  simply  for  elevators  at  the  termini  of  the  different  railroads  in  con- 
nection with  the  Western  system  of  j;radin«?  t>;riiin.  It  may  not  be  generally  known 
that  New  Yoi:k  has  more  elevators  tlian  any  other  city  in  the  Union,  but  they  consist 
]»rincii>ally  of  stationary  elevators  at  the  various  ^triw  storaj^e  warehouses  and  fl«)at- 
in«;  elevators  for  the  transfer  of  «:;ra in  from  canal-boats  into  sea-jroin«;  vessels,  this  lat- 
ter variety  moving  about  the  harbor  from  i)oint  to  i)oint  by  their  own  steam  and  con- 
stituting a  most  effective  instrumentality  in  our  terminal  facilities.  The  New  York 
Central  Koad  has  also  one  tirst-class  elevator  for  receiving  and  storing  the  grain  trans- 
ported by  that  road,  and  another  is  in  process  of  construction.  With  these  and  tlie 
system  of  grading  grain,  which  hms  but  just  fairly  come  into  general  use,  New  York 
<-annot  be  said  to  be  deticient  in  terminal  facilitit's,  at  least  those  for  tlie  handling  of 
^raiu. 

Question  1;").  What  has  been  the  general  effect  of  the  west-bound  apportionment 
scheme  fnun  New  York  upon  the  connnercial  interests  of  that  city,  with  s]>ecial  refer 
ence  to  those  interests  in  which  it  comi)etes  with  rival  seaboard  cities,  and  what,  in 
your  oi>inion,  will  probably  be  the  effect  of  tliis  apportionment  scheme  upon  the  future 
commercial  interests  of  New  York  City? 

Answer.  I  believe  that  the  general  effect  of  the  apportionment  scheme  out  of  New 
York,  commonly  known  as  the  pool,  up(m  the  connnercial  interests  of  this  city,  with 
special  reference  to  those  interests  with  which  it  competes  with  rival  cities,  has  been 
unfavorable ;  not  that  an  apportionment  scheme  is  bad  in  all  its  features,  but  the  rates 
at  tirst  established  were  so  high  that  circuitous  routes  could  cut  lar";ely  from  the  ])ool 
rates  and  still  make  money,  notwithstanding  their  unfavorable  location;  second, 
owing  to  the  number  of  lines  in  the  apportionment  scheme  it  involved  the  transfer  of 
some  freight  from  one  line  to  another  without  the  concurrence  of  shippers.  This,  in 
some  cases,  resulted  in  delay  and  inconvenience  to  the  receiver  of  the  goods,  and 
savoring  as  it  does  somewhat  of  arl)itrary  control  over  matters  which  had  heretofore 
been  directed  by  shippers  or  receivers  of  goods,  it  was  an  element  of  dissatisfaction 
which  dealers  in  rival  cities  did  not  fail  to  magnify  and  make  the  most  of.  (As  au 
illustration  see  letter  clipped  from  the  York  York  '^Shippiny  Lint.^^) 

''Railway  mismaxagement. 

"Editors  Shipping  and  Commercial  List: 

"Gentlemen:  As  you  re])re8ent,  as  well  as  any  New  York  journal  I  know  of,  the 
business  men  of  New  York,  I  desire  to  call  your  attention  to  a  matter  that  is  driving 
the  trade  away  from  >our  city  faster  than  anythiug  I  ever  heard  of.     It  is  the  'pool- 
ing' system  of  the  trunk  railroads  out  of  your  city.     The  W^estern  l)uyer  now  has  no 
choice  of  the  way  his  goods  shall  come.    The  superintendent  of  the  '  jmoF  directs  and 
divides  freight  to  suit  himself.     Now,  if  all  railroad  companies  did  their  business  with 
erjual  promptness  and  dispatch,  and  in  a  business-like  manner,  there  would  be  no  com- 
jdaint.     But  they  do  not.     Some  lines  will  bring  goods  from  New  York  to  this  point 
in  four  or  live  days,  and  settle  any  loss  for  damages  promptly,  while  others  will  take 
as  long  as  three  weeks,  and  it  is  a  hopeless  case  to  attempt  to  collect  a  cent  of  dam- 
ages from  them.     Some  lines  have  pleasant,  affable  gentlemen  for  agents;  others  are 
represented  by  some  blockhead  of  a  relative  of  a  high  otttcial,  who  leaves  his  business 
to  a  boy,  and  is  hardly  ever  to  be  found  in  his  otfice,  or  when  found  knows  nothing  of 
Avhat  he  is  hired  to  attend  to.     Now,  to  be  forced  to  do  business  with  such  lines  is  an 
outrage.     They  were  always  forced  to  cut  rates  to  get  any  business,  and  even  then  not 
get  a  fair  proportion.    We  would  rather  ])ay  more  an<l  do  business  with  reliable  lines. 
It  is  just  the  same  with  one  of  these  freight  lines  as  it  is  with  a  business  house.    Anian 
would  rather  do  business  with  a  tirst-class  reliable  firm,  and  pay  their  ]>rice,  than  deal 
Avith  one  of  those  'snide'  concerns  that  is  always  playing  sharp  and  selling  inferior 
goods.     I  have  always  given  the  preference  to  the  Merchants'  Dispatch  Line,  and  can 
safely  calculate  on  getting  goods  in  four  days  from  New  York.     If  w«^  have  any  losses 
they  settle  them  promi)tly.     There  are  several  other  lines  that  do  just  as  well— the 
Star  Union  for  instance — but  we  started  with  that  line,  and  as  long  as  everything 
Avas  satisfactory  Ave  made  no  change.     Now^  Ave  send  an  order  by  letter  or  telegra])h 
to  our  merchant  in  New  York  to  ship  us  so  and  so  by  Merchants'  bisi)atch.     The  mer- 
chants obey  orders,  but  the  Merchants'  Dispatch  gets  more  than  their  share  of  freight, 
according  to  the  'pool.'    The  superintendent  of  the  '1)00!'  directs  that  my  goods 
Avith others,  be  taken  OA^er  to  the  Baltimore  and  Ohio,  or  Erie  or  some  other  road, 
and  instead  of  getting  my  goods  in  four  days  I  am  out  of  them  one,  two,  or  three 
Aveeks.     I  have  just  received  a  lot  of  goods  three  Aveeks  out,  and  damaged  at  that.     I 
d<m't  belicAe  I  Avill  ever  recover  a  cent  of  damages.     Noav  this  *  pooling'  arrangement 
does  not  exist  in  Boston  or  Philadelphia,  and  Ave  can  onler  goods  from  either  and  des- 
ignate the  line  Ave  Avant  them  shipped  by,  and  get  them  as  ordered.    W^e  intend,  there- 
fore, to  go  to  these  places  and  buy  our  goods  as  far  as  possible.     I  sent  orders  for  oA'er 
$5,(MK)  AA'orth  of  goods  this  Aveek  to  Boston,  rather  than  buy  in  New  York  Avhere  I  liaA^e 
always  bought  my  goods,  rather  than  b.'  subjected  to  the  outrage  that  is  now  being 


REPORTS    OF    EXPERTS.  7 

perpetrated  by  the  railroad  lines  centering  in  your  city.  We  shall  avoid  New  York  as 
much  as  possible  until  her  merchants  see  fit  to  stand  up  and  fight  for  their  rights  and 
that  of  their  patrons.  Why  don't  the  lines  '  pool'  their  passenger  trathc  the  same  Avay  ? 
Suppose  a  man  Avas  to  go  to  the  Erie  Railroad  and  ask  for  a  ticket  to  Indianapolis  or 
Saint  Louis,  and  be  told  they  had  <lisposed  of  their  quota  for  that  day,  and  he  must 
go  via  the  Baltimore  and  Ohio,  or  the  Chesapeake  and  Ohio,  or  through  Canada ;  it 
Avouhl  not  be  lon^  before  x>eople  would  give  your  city  a  Avid(i  berth.  If  the  railroad 
lines  Avant  to  combine  and  keep  up  freights,  let  them  'pool'  their  earnings,  and  give 
the  shipper  the  privilege  of  sending  his  goods  as  he  may  choose.  Whether  the  New 
York  merchants  know  this  or  not  I  am  not  aware,  but  as  it  has  been  going  on  nearly 
*a  year,  and  they  are  ai)j>arently  taking  no  steps  to  break  it  up,  the  only  recourse  a 
"Western  buyer  has  is  to  let  NevA^  York  severely  alone.  I  bought  over  !$50,()00  Avorth  of 
^oods  in  New  York  last  year — a  small  amount — but  there  are  more  like  me,  and  New 
Y'ork  will  get  as  little  as  possible  this  year. 
"  Very  respectfully, 

"SUBSCRIBER. 
"Indianapolis,  March  29, 1878." 

Had  the  rates  of  the  pooled  lines  been  fixed  on  a  basis  Avhich  AA'ould  yield  but  10  per 
cent,  on  the  capital  actually  paid  in  by  the  stock  and  bond-holders,  and  all  s])ecial  con- 
tracts been  abrogated,  the  apportionment  scheme  might  liaA'e  proA'ed  a  substantial 
benefit,  but  there  has  been  a  strong  feeling  in  the  commercial  community  that  it  Avas 
an  effort  to  abrogate  by  the  pow  er  of  a  monopcdy  the  ordinary  laws  of  commerce,  Avhich 
laAvs,  if  left  to  Avork,  would  decree  the  failure  and  licpiidation  of  these  roa<ls,  the  same 
as  a  merchant  with  an  unduly  inflated  business  would  liaA'e  to  fail  and  lifpiidate.  It 
is  unquesticmably  true  that  production  and  commerce  in  this  country  is  being  taxel  in 
the  Avay  of  exorbitant  rates  for  transportation  to  a  tkr  greater  extent  than  the  ordi- 
nary taxation  for  the  support  of  government,  and  that  Av^hile  straining  at  the  gnat  of 
ordinary  taxation  we  have  swallowed  the  camel  in  the  shape  of  taxation  for  transpor- 
tation. This  is  illustrated  by  the  revenues  of  the  railroads  of  the  State  of  New 
York,  Avhich  exceed  by  more  than  tweh^e  times  that  of  the  entire  revenues  of  the 
State  derived  from  taxation,  and  the  New  York  Central  Road  alone  has  in  ten 
years  paid  dividends  ui)on  the  Avatered  stock  Avliich  Avas  put  into  that  road  in  the 
years  18(37-'68;  dividends  upon  the  Avatered  ])ortion  alone,  which  in  ten  years,  with 
compound  interest,  amount  to  more  than  fifty-two  millions  of  dollars.  The  Pacific 
railroads  luiA'e  during  the  last  ten  years  also  exacted  from  the  public  many  millions 
of  dollars  over  and  above  AAiiat  would  liaA^e  been  require  I  to  have  paid  liberal  inter- 
est and  dividends  upon  the  actual  cost  of  those  roads.  The  report  of  the  iuA'estiga- 
tion  into  the  management  of  the  Credit  Mobilier  Construction  Co.,  of  the  Union  Pa- 
cific Road  has  show  n  that  the  directors  of  the  Union  Pacific  Road  presented  them- 
selves, as  directors  of  the  Credit  Mobilier  Construction  Co.,  Avith  $94, 650, 287. '24  in  cash, 
stock,  and  bonds,  of  Avhich  they  acknoAvledged  |43, 929, 328.24  Avc^re  profits.  It  is  be- 
licA'^ed  by  many  that  the  $^7,2;ifi,000  receiv^ed  as  the  proceeds  of  bonds  issued  to 
them  by  the  government  Avould,  if  honestly  expended,  have  been  sufficient  to  con- 
struct the  entire  Avork ;  and  yet  the  commerce  of  this  country  is  being  taxed,  and 
]>robably  Avill  continue  to  be  for  all  time,  to  pay  dividends  upon  the  entire  mass  of 
obligations  thus  issued.  In  vicAV  of  such  facts  as  these,  any  apportionment  scheme 
Avhich  involves  fhe  charging  of  rates  higher  than  Avould  be  necessary  to  pay  a  fair 
return  upon  cajntal  necessary  to  honestly  construct  the  roads  of  which  the  combina- 
tion is  composed,  must  proA'e  detrimental  to  the  interests  not  only  of  New  York  City 
but  the  Avhole  country. 

Question  16.  Please  to  mention  the  particular  branches  of  trade  which  haA^e  been  to 
any  considerable  extent  deflected  from  New  York  to  other  Athantic  seaports  during  the 
last  five  years,  and  state  tln^  opinion  generally  entertained  among  the  leading  mer- 
chants of  New  York  as  to  the  cause  or  causes  which  have  led  to  such  changes  in  the 
course  of  trade. 

Answer.  In  export  trade  large  quantities  of  business,  principally  grain,  liaA'c  been 
diverted  from  New  York  to  Baltimore  and  Philadelphia  during  the  Avinter  season  Avhen 
the  great  natural  advantages  Avhich  New  York  enjoys  are  neutralized  by  canal  uaA'i- 
gation  being  closed,  and  it  is  at  this  time  of  the  year  that  the  distance  allowance  in 
favor  of  Baltimore  and  Philadelphia,  together  with  their  heretofore  somewhat  cheaper 
terminal  charges  on  goods  arriving  by  rail  and  destined  for  export,  operate  greatly  to 
their  advantage.  That  this  distance  alloAvance  is  unjust  is  proved  by  the  opinion 
generally  entertained  by  experts,  that,  owing  to  the  volume  of  business  done,  it  ac- 
tually costs  the  railroads  less  to  doNcAv  York  business  than  it  does  either  Philadelphia 
or  Baltimore  business,  and  this  is  virtually  conced«'d  by  all  the  roads  making  uniform 
rates  on  import  and  export  freight  from  and  to  foreign  countries  through  all  the  ports. 
It  is  disproA'ed  also  by  gi  ving  to  Boston  ecpial  and  in  some  instances  loAver  rates,  not  with- 
staudiug  her  distance  to  principal  Western  cities  is  greater.  The  foregoing  relates  |)rinci- 
pally  to  export  trade,  l)ut  the  discrimination  against  New  York  on  her  importing  and 
distributing  business  is  perhaps  the  most  important  and  flagrant  of  the  two.     Goods 


J^ 


' 


8 


APPENDIX. 


Lave  been  habitually  carried  on  special  contracts,  to  jobbing  points  in  New  York 
State  and  beyond,  for  a  few  favored  wholcHale  merchants,  at  pric<'8  ranginff  from 
one-lmlt  to  one-third  those  charged  to  the  general  public.  This  practice  has  had 
the  ettect  to  lorcibly  take  from  wholesale  merchants  on  the  seaboard  and  give  it  to 
Avholesale  merchants  at  interior  Jobbing  points.  This  is  notably  true  of  the  dry- 
go<Mls  trade,  and  all  branches  of  trade  have  thus  been  more  or  less  injured.  But  for 
the  great  advantages  enjoyed  by  New  York  in  having  the  Erie  Canal'a  great  part  of 
tlie  year  to  swell  Its  export  business,  audits  preponderance  of  capital,  these  etfecta 
wouUl  «loubtles8  have  been  more  serious  than  they  have  been. 

Question  17.  Have  the  railroads  terminating  at  New  York  entered  into  any  arrancre- 
meut  Avith  ocean  steamer  lines  designed  to  meet  special  advantages  atforded  at  other 
Atlantic  seaports  f 

Answer.  It  is  generally  understood  that  the  railroads  terminating  at  New  York  have 
agreed  with  the  Baltimore  and  Philadelphia  lines  that  rates  from  and  to  interior 
AVestern  citie^  on  export  and  import  trade  shall  be  uniform  through  all  the  ports,  and 
tliat  these  roads  accept  their  pro  rata  portion  of  the  through  rate.  Rates  from  Liver- 
pool to  Chicago  by  way  of  Boston,  at  this  time,  April,  1878,  are  some  two  shillini's 
per  ton  lower  than  through  the  other  ports.  This  is  probably  attributable  to  the  ciil  - 
ting  of  the  railroad  rate  by  the  Grand  Trunk  Line. 

Question  18.  Are  the  steamer  lines  running  out  of  New  York  to  any  extent  pur- 
chasers of  gram  for  the  purpose  of  completing  their  cargoes  to  Europe ;  and,  if  so, 
what  18  the  opinion  entertained  by  the  grain  merchants  of  New  York  as  to  the  etfect 
ot  such  purchases  upon  trade  ? 

Answer.  I  am  not  aware  and  cannot  ascertain  that  any  of  the  regular  steamer  lines 
running  out  of  New  York  are  in  the  habit  of  purchasing  grain  for  the  purpose  of  com- 
pleting their  cargoes  to  Europe.  Some  time  since  this  was  done  to  some  extent  by 
the  Anclior  Line,  but  it  gave  such  dissatisfaction  to  the  merchants  who  were  in  tlie 
halMt  of  shipping  by  this  line  that  the  practice  was  relinquished.  It  is  manifest  if 
such  a  practice  were  tolerated  on  the  part  of  common  carriers,  that  at  times,  when 
lieight  room  was  scarce  and  protits  on  shipments  large,  the  temptation  would  be 
great  for  said  carriers  to  monopolize  the  carrying  capacity  of  their  steamers  and  rule 
out  the  general  public.  The  opinion  entertained  by  merchants  is  that  this  practice  is 
nntair  to  the  commercial  community  and  imcompatible  with  the  functions  of  a  com- 
mon caiTier. 

Question  19.  AMiat  is  the  present  number  and  capacity  of  grain  elevators  at  New 
York,  and  where  are  those  elevators  located  ? 

Answer.  The  number  of  stationary  elevators  at  the  port  of  New  York  is  seventeen, 
with  a  storage  capacity  of  16,420,000  bushels;  the  number  of  floating  elevators  is 
thirty-four  with  a  transfer  capacity  per  hour  of  279,800  bushels.  The  location  and 
other  details  in  connection  with  these  elevators,  taken  from  the  official  list  of  the  Pro- 
duce Exchange,  are  herewith  submitted. 

Floating  and  stationary  elevators  at  the  port  of  Xeto  York. 

STATIONARY. 


Xames  of  owners  or  managers. 


The  Grain  TVarehonsingCoin- 

r>any,  Atlantic  Dock,  Brook- 
\Ti,  office  5  Moore  street, 
Ne»<r  York.  L.  B.  Shaw, 
president ;  R.  H.  Laimbeer, 
treasurer. 


Hazeltine  (t  Co.,  31  Pearl  street 


Xames  of  elevators. 


Bartlett  Sc  Greene 


J.  P.  &  G.  C,  Robinson,  office 
14  Coenties  Slip. 

New  York  Central  and  Hnd- 
son  River  Railroa*!  Ele- 
vator, Whitney  &  Twom- 
bley.  lessees.  43  Whitehall 
street 


f  Stores  Nos.  2  to  28  inclusive 
Stores  Nos.  6  to  11  inclusive 

I 

Stores  Xos.  70  to  92  inclusive 
'  Columbia  Stores 

Kelsey's  Stores 

Central , 

J.  P.  &  G.  C.  Robinson's... 

New  York  Central  and  Hud- 
son River  Railroad. 


Location. 


Commercial   Wharf, ' 
Atlantic     Dock, 
Brooklyn. 

Clinton  Wharf,  At- 
lantic Dock,  Brook- 
lyn. 

South  Pier,  Atlantic 
Dock,  Brooklyn. 

Foot  Atlantic  street^ 
Brooklyn. 

Foot  Irving  street, 
Brooklyn. 

150  to  162  Furman 
street,  Brooklyn. 

Erie  Basin,  Brooklyn . . 

Foot  Sixtieth  street, 
North  River,  New 
York  City. 


1,  500,  000 
1,000,000 
500,000 
2, 800,  000 
1  500,000 


25,000 


8,000 
8,000 
5,000 
8,000 
60,000 


REPORTS   OF   EXPERTS 

Floating  and  stationary  elevators  at  the  port  of  Xew  York — Continued. 

STATIONARY. 


Names  of  owners  or  msinagers. 


Names  of  elevators. 


Location. 


o 


OJ 


a  o 


ci:  A 


2-3 


H 


F.Woodruff  &  McLean,  office 
103  Water  street. 

United  States  Wareliouse 
Company,  office  6  Front 
street,  Ira  K<^tchum  vice- 
president  ;  F.  S.  Mathews, 
secretary. 

Francis  E.  Pinto,  37  Pearl 
street. 

Lawrence's  Stores,  foot  First 
street.  East  River,  office 
3  Stone  street. 

Tripp,  Rogers  &  Co.,  foot 
West  Thirty-fourth  street. 

W.  H.  Payne,  foot  East  One 
hundred  and  twenty«uinth 
street. 

E,  M.  Van  Tassel,  Pier  39 
North  River. 

E.  M.  Van  Tassel  &  Co.,  Pro- 
vost and  Twelfth  streets, 
Jersey  City. 

Fellows  &  Beyer,  foot  Taylor 
street,  Brooklyn,  E.  D. 


F.  Woodruff  &  McLean's  . . . 

United   States  Warehouse 
Company. 


Foot  Joraleraon  street. 

1, 000,  000 

6,000 

Brooklyn. 

Foot   Defjraw  street. 

500,  000 

8,000 

Brooklyn. 

Francis  E.  Pinto's 
Lawrence's  Stores 

Tripp's 

Payne's 


Van  Tassel's 

E.  M.  Van  Tassel  &  Co 

Fellows  &  Byers's 


Atlantic  Dock,  Brook- 
lyn. 

Foot  First  street,  New 
York  City. 

Foot  West  Thirty- 
fourth  street.  New 
York  City. 

Foot  East  one  hun- 
di-ed  and  twenty- 
ninth  street,  New 
York  City. 

Foot  Vestry  street. 
New  York"  City. 

Comer  Provost  and 
Twelfth  streets,  Jer- 
sey City. 

Foot  Taylor  street, 
Brooklyn,  E.  D. 


800,000 
300,  000 


300, 


90, 


40, 
50, 


000 
000 

000 
000 


FLOATING. 


Names  of  owners  or  managers. 


International  Grain  Elevating  Association, 
office  31  Pearl  street,  New  York,  E. 
Annan,  president. 


The  New  York  Floatinjr  Elevator  Com- 
pany, George  D.  Puffer,  president,  office 
47  Pearl  street. 

The  Floating  Elevator  Company,  E.  G. 
Burge8.s,  president,  office  39  Pearl  street. 

International  Grain  Elevating  Association, 
office  No.  1  Moore  street,  George  E. 
Nichols,  president. 

The  Com  Exchange  Elevator  Company, 
office  38  Pearl  street,  R.  H.  Vaughan, 
president. 

Clark  &  Allen,  foot  East  Twenty-eighth 
street. 

Hazeltine  &  Co.,  31  Pearl  street 


Charles  E.  Huberer,  foot  Amity  street, 

Brooklyn. 

David  Jones,  No.  619  Sixth  street 

W.  D.  Maufjam's  Son,  office  92  Broad  street ; 

station,  Pier  6,  North  River. 
Marsh,  White    &  Co.,  foot  North  Fifth 

street,  Brooklyn,  E.  D. 


Name  of  elevators. 


'Bolivia,  Renovator,  Egypt,  each 5, 000 

bushels. 
Continental,  Eldridge,  International, 
Manhattan,  Metropolitan,  Russia, 
R.  H.  F08S,  and  Scotia,  each  4,000 
bushels. 
Malster,    3,500   bushels;    Domestic, 
1,800;  Kings  County  and  Croton, 
1,500  bushels  each. 
Albany,  Havre,    Hudson,    Liverpool, 
Oswego,  each  5,000  bushels. 

New    York    (2  legs),  8,000    bushels ; 

Transporter  and  London,  4.000  each. 
Telegraph  and  Excelsior,  each  3,000 

bushels. 


cs       . 

s 


H.  F.  Hebbard. 


Baldwin    and    Columbia,   each    4,000 

bushels. 
Enterprise > 


Active 

Union  and  Hilly er,  each  3,000  bushels 


Manhattan. 


4  000 
3,000 

4,000 

2,500 

3,000 
1,000 


40,  000       3,  000 


CI 


15,000 
32,  000 

8,300 

25,  000 

16,000 
6,000 

3,000 

1,500 

8,000 

3,500 

2,000 
6,000 

5,000 


Total  (17  stationary  and  34  floating  elevators) 16, 420,  000  279,  800 


^•^^iSXr-^XTf^Jitz. 


10 


APPENDIX. 


Question  20.  Within  what  area  in  this  conntry  is  the  grain  trade  of  New  York  con- 
fined? This  inqniry  rehites  to  the  territory  snpp lied  with  grain  and  flour  from  the 
New  York  market. 

Answer.  The  domestic  area  supplied  with  flour  and  grain  from  the  New  York  market 
is  very  limited,  l)eing  oonHned  to  the  environs  of  New  York  and  a  few  points  along 
our  seacoast.  Formerly  almost  the  whole  of  New  England  was  8up])lied  from  New 
York,  but  the  distribution  of  flour  and  grain  by  rail  during  the  past  few  years  has 
attained  large  proportions,  and  now  the  whole  interior,  as  well  as  most  of  the  small 
seaporls,  are  supplied  by  direct  shipments  from  the  West  by  rail.  Of  the  enormous 
quantity  of  cereals  and  their  products  which  find  a  market  in  New  York  by  far  the 
larger  proportion  are  destined  for  export,  but  of  course,  with  a  i)opnlation  exceeding 
two  millions  within  the  circle  of  a  few  miles,  the  local  consumption  is  also  consider- 
able. New  York,  however,  depends  principally  upon  her  export  trade,  for  which, 
owing  to  her  being  the  principal  seaport  of  the  country,  and  having  large  numbers 
of  steam  and  sail  lines  to  all  parts  of  the  world,  she  enjoys  superior  facilities. 

Question  21.  Please  to  mention  the  advautages  Avhich,  in  your  o])ini()n,  have  re- 
sulted from  the  formation  of  the  New  York  railroad  ap])orti(>nment  scheme — 

Ist.  In  preventing  discriminations  as  against  the  iuterests  of  interior  i)oints,  like 
Buft'alo,  Pittsburgh,  Cleveland,  Detroit,  Toledo,  and  Cincinnati,  an<l  in  favor  of  the 
Atlantic  sea  ports,  and  generally  discrimination  against  all  that  class  of  traffic  com- 
monly known  as  local  or  non-competitive. 

2d.  Advantages  which  may  have  resulted  from  the  stability  which  has  thus  been 
secured  in  rates. 

3d.  Advautages  from  the  elimination  of  the  uncertainty  in  the  minds  of  merchants 
generally  as  to  the  comjiarative  rates  charged  them  and  other  competitors. 

Answer.  The  advantages  which  have  resulted  from  the  formation  of  the  railroad 
apportionment  are  the  abrogation,  to  some  extent,  of  si>ecial  contracts  to  wholesale 
merchants  in  Western  cities,  although  there  are  indications  that  this  rule  has  been 
broken  in  some  instances. 

There  is,  unquestionably,  an  advantage  in  the  stability  of  rates,  provided  they 
be  reasonalde  ;  but  the  high  rates  charged  by  the  pooled  lines  in  a  great  measure  de- 
feat this  object.  One  serious  break  occurred  owing  to  the  competition  of  the  Grand 
Trunk  Road.  Roundabout  lines  were  able  to  divert  considerable  traffic,  and  various 
ovasious  have  taken  place,  as  there  always  will  when  excessive  tariff's  are  sought  to 
be  enforced.  [Note. — As  one  of  the  anomalies  in  railroad  management  I  may  here 
nu*ntion  that  east-bound  rates,  with  a  full  traffic,  are  usually  much  less  than  west- 
bound rates  (at  the  present  time.  May,  1878,  nearly  100  per  cent,  less) ;  and  this  not- 
withstanding about  two-thirds  of  the  cars  are  hauled  back  to  the  West  empty.  A 
usual  law  of  business  is  that  the  snuiller  the  volume  of  business  the  stronger  is  the 
competition  to  secure  a  share  of  it  and  the  more  slender  are  the  profits;  in  this  in- 
stance it  is  precisely  the  reverse.]  Local  or  non  competitive  rates  have  not  been  af- 
fected by  the  apporti<mment  scheme,  and  here  the  great  discriuiiuation  and  alnise  of 
special  contracts  remain  in  full  operation.  The  advantages  resulting  from  eliuiiuat- 
ing  the  uncertainties  in  the  minds  of  merchants  generally  as  to  the  comparative  rates 
charged  them  and  other  competitors  have  not  as  yet  been  realized  although  with 
honest  management  these  may,  in  time  be  secured. 

Question  22.  Please  to  present  your  views  as  to  the  injustice  of  the  special  contracts 
above  mentioned  by  a  description  of  those  demoralizing  practices  in  tlie  course  of  the 
contests  between  the  solicitors  of  freights  in  which  the  nu^rchauts  have  been  led  to 
practice  deceptions  uixui  the  agents  of  the  railroad  companies,  and  in  which  the  agents 
of  the  companies  have  been  led  to  practice  deceptions  upon  the  merchants. 

Answer.  In  an  ethical  view  these  special  c<mtracts  are  productive  of  uncertainty, 
distrust,  dissatisfaction,  and  general  demoralization.  They  are  necessarily  unfair,  and 
therefore,  to  a  great  extent,  secret  and  confidential.  Merchants  who  would  ])refer  to 
have  a  uniform  rate,  which  would  give  them  no  advantages  over  their  neighbors  or 
their  neighbors  over  them,  are  ccmipelled,  sd  long  as  this  mode  of  business  is  tolerated, 
to  avail  themselves  of  these  special  a<l  vantages,  or  else  they  are  soon  distanced  in  the 
race  by  less  scrupulous  competitors.  Irregularities  in  rates  are  a  premium  upon  decep- 
tion in  classification,  and  this  together  with  other  evasions  are  umre  or  less  i)racticed 
both  with  and  without  the  connivance  of  the  agents  of  the  companies. 

Question  23.  Please  to  explain  in  what  manner  and  to  what  extent  the  practice  of 
making  special  contracts  to  favored  shippers  is  in  any  manner  influenced  or  controlled 
by  the  New  York  apportionment  scheme  as  to  west-bound  traffic,  referring,  in  this 
connection,  both  to  shipments  east  of  Buffalo,  Dunkirk,  Pittsburgh,  Wheeling,  and 
Parkei-sburg,  and  to  shipments  west  of  these  points. 

Answer.  The  apportionment  scheme  has  practically  no  eft'ect  upon  special  contracts 
made  to  points  east  of  Buffalo,  Dunkirk,  Pittsburgh,  Wheeling,  and  Parkersbnrg. 
As  regards  principal  points  west  of  these  named  it  theoretically  abolishes  special  con- 
tracts, and  if  conscientiously  lived  up  to  it  would  be  a  redeeming  feature  of  the  whole 


REPORTS    OF    EXPERTS. 


11 


plan ;  otherwise  it  is  the  most  unequal  and  onerous  form   of  class  taxation  of  which 
we  have  any  record. 

Question  24.  Please  to  describe  the  Belt  Line,  stating  the  rules  and  regulations  gov- 
erning its  use  by  day  and  night. 

Answer.  The  BeltrLine  of  railroad  in  New  York,  more  properly  known  as  the  Central 
Park,  North  and  East  River  Railroad  Company,  is  a  horse  railroad  running  along 
West  and  South  streets,  comprising  the  water  front  of  the  business  part  of  the  city ; 
thence  along  various  streets  and  avenues  on  the  east  side  of  the  city  to  Fifty-ninth 
street,  where  it  crosses  the  city,  skirting  the  lower  boundary  of  Central  Park,  to  Tenth 
avenue,  and  down  that  avenue  again  until  it  again  strikes  the  water  fronton  the  west 
side  at  West  street.  A  portion  of  its  route  in  West  street  above  Canal  has  heretofore 
been  occupied  bv  the  track  of  the  Hudson  River  Railroad,  leading  to  the  freight 
depot  at  St.  John's  Park  on  the  west  side  of  the  city,  and  this  track  has  been 
jointly  used  by  the  Belt  Road  and  the  Hudson  River  Railroad  under  a  working 
arrangement  for  that  pur})Ose.  Recently,  however,  at  the  solicitation  of  the  mer- 
chants, our  municipal  authorities  have  granted  permission  to  use  the  track  of 
the  Belt  Railroad  for  the  movement  of  freight-cars  during  certain  hours  of  the  night, 
and  has  given  power  to  lay  switches  to  the  various  wharves  and  warehouses  along 
it«  route.  It  is  believed  that  this  is  an  important  step  toward  improving  the  terminal 
facilities  of  New  Y(nk,  and  bringing  the  cars  aud  shii)s  together,  as  is  done  in  the 
other  ]>rincipal  seaboard  cities.  It  will,  to  a  considerable  extent,  remove  the  excuse 
which  New  York  roads  have  urged  with  some  force,  that  New  York  did  not  extend  to 
them  the  same  facilities  which  other  seaboard  cities  extended  to  their  roads;  and  it  is 
to  be  hoi>ed  that  it  is  <uily  the  forerunner  of  a  more  complete  and  comprehensive 
system  of  terminal  facilities  worthy  of  the  principal  seai)ort  of  a  great  nation. 

Questi<Mi25.  You  are  requested  to  add  to  the  foregoing  inquiries  any  statistical  or 
other  facts  which  you  may  deem  of  interest,  either  with  respect  to  the  commercial 
interests  of  New  York  or  with  reference  to  the  movements  of  or  the  conditions  att'ect- 
iug  the  internal  commerce  of  the  country. 

Answer.  In  accordance  with  the  re<iuest  to  add  any  facts  with  reference  to  the  con- 
ditions aftecting  the  internal  commerce  of  the  country,  I  desire  to  call  attention  to 
the  facts  set  forth  in  one  of  the  reports  of  the  committee  on  railroad  transportation  of 
the  American  Cheap  Transportation  Association,  from  which  I  have  made  the  follow- 
ing extracts.  The  array  of  defects  in  the  management  of  our  modern  highways  there 
set  forth  is  (^uite  remarkable,  and  the  remedies  proposed  seem  eminently  conserva- 
tive and  just.     Beginning  with  abuses  in  construction,  it  says: 

"The  reckless  and  unprincipled  manner  in  which  some  railroads  are  built  would  as- 
tonish many  persons,  and  we  give  the  following  as  a  sample :  A  charter  is  obtained 
and  a  few  liien  get  together  without  a  dollar  in  ready  money,  form  a  company,  issue 
construction  Iwnds  'secured  by  mortgage  ujjou  the  road,'  and  a  committee  of  directors 
is  sent  to  New  York  to  '  place  'the  bonds.  The  committee  enter  into  negotiations  with 
some  prominent  banker  to  undertake  the  placing  of  the  bonds,  he  to  get  what  he  can 
for  tbem  and  allow  the  road  70  cents  on  the  dollar,  the  road  to  pay  the  advertisiug 
bills.  If  the  committee  are  honest  the  road  ultimately  gets  70  cents  less  the  adver- 
tising bills,  but  many  committees  are  not  honest,  and  as  soon  as  they  have  found  a 
l)anker  to  undertake  the  job  at  70  they  communicate  with  the  board  of  directors  at 
home,  stating  that  the  best  they  can  do  is  GO,  and  ask  for  authority  to  place  the  bonds 
at  that  figure.  Having  their  confederates  at  home  in  this  inside  ring,  the  authority 
is  easily  obtained,  and  by  arrangement  with  the  banker  he  settles  with  the  road  at  (>0, 
aud  pays  10  per  cent,  over  to  this  syndicate  for  their  personal  use  and  benefit.  If  there 
is  a  happy  combination  of  circumstances,  such  as  absence  of  financial  disturbances, 
suspensicm  of  the  banker,  «fec.,  and  if  they  get  all  the  counties,  cities,  and  towns  along 
their  route  to  issue  bonds  liberally,  the  road  may  be  finally  built  and  furnished  with 
rolling  stock  ;  then  our  worthy  friends  of  the  board  of  management  divi<le  the  stock 
between  themselves  without  e<iuivalent,  fix  the  rates  for  freight  and  ])asseugers  high 
enough  to  pay  interest  on  the  face  value  of  the  bonds  and  i)ar  value  of  the  stock,  and 
theu,.after  voting  themselves  fat  salaries,  ])roceed  to  foist  the  stock  off"  upon  an  unsus- 
pecting public.  As  soon  as  the  members  of  the  ring  manage  to  sell  most  of  their  stock 
they  go  to  work  and  organize  a  '  Fast  Freight  Line,'  or  other  Credit  Mobilier  institu- 
tion, to  which  they  give  a  contract  which  soon  impoverishes  the  road  and  enriches 
them,  so  that  when  the  road  passes  into  bankrui)tcy  they  are  enabled  to  buy  it  in, 
issue  new  stock,  and  re])eat  their  little  financial  arrangement  over  again.  In  sketch- 
ing the  comidetiou  of  this  road  we  forgot  to  say  that  there  was  a  'construction'  ring; 
this  ring  had  their  slice  from  every  contract  made,  and  not  a  mile  was  graded  or  tie 
laid,  not  a  rail  or  engine  or  car  purchased,  not  a  depot  erected  or  nail  driven,  but  a 
percentagt^  went  into  the  ])ocket  of  the  ring. 

"As  for  the  banker,  by  a  free  use  of  the  press  (who  lend  the  weight  of  editorial  col- 
umns to  the  i)roject),  he  succeeds  in  'i)laciiig'  the  bonds  at  90,  95,  or  i)ar,  among  the 
widows,  orphans,  and  other  unsophisticated  persons  of  small  means  avIio  have  con- 
fidence  in   the    banker  and  editor   that  recommend  the  conversion  of   government 


i      ^1 


(     'A 


12 


APPENDIX. 


REPORTS   OF    EXPERTS. 


13 


f 

1 


1 


boiuls  into  the  'equally  reliable  and  better  paying  railroad  securities.'  Everytliinj^: 
jjot's  on  smoothly  until  some  morning  the  railr(»ad  stops  pay  in «?  interest  upon  its  bonjis, 
passes  into  bankrui)tey,  sells  for  little  or  nothing;,  and  that  is  the  ond  of  it,  so  far  as 
the  banker,  the  editor,  and  the  person  of  small  means  are  concerned.  In  the  mean 
time  the  manajjers  of  the  road  find  it  necessary  to  buy  the  usual  number  of  legislat<»rs, 
and  retain  all  the  best  legal  talent  along  the  line  of  the  road,  in  order  *to  protect  their 
rights  from  the  encroachments  of  the  peoi)le,'  who  have  languished  under  extortion- 
ate freight  charges,  and  who  have  been  groping  blindly  about  to  tind  a  way  to  reuu'dy 
the  evils  which,  notwithstanding  that  they  labor  early  and  late,  and  raise  crops  which 
are  the  admirati(m  of  the  world,  are  nuiking  them  poorer  each  year.  Now,  while  wo 
are  far  from  desiring  an  indiscriminate  war  upon  railways,  we  claim  that  public  opin- 
ion must  be  awakened  to  these  abuses,  and  that  they  must  be  eliminated  from  our 
]>resent  railway  system.  The  ])eoi)le  of  this  country  are  beginning  to  lind  that  these 
<lefects  in  our  transportation  system  are  the  '  Old  Man  of  the  Sea'  upon  the  shouhlers 
of  the  commerce  of  the  country,  and  when  they  realize  that  the  watered  stocks  and 
other  swindles  in  this  line  are  a  greater  burden  than  our  entire  national  debt,  we  may 
be  sure  that  they  will  in  some  way  work  out  a  rennuly. 

"The  foreg(»ing  relates  principally  to  the  defects  in  the  manner  of  construction,  but 
they  are  none  the  less  prondnent  in  the  operation  and  management  of  railways.  Prol)- 
ably  the  greatest  abuse  in  the  present  system  of  railway  management  is  the  practice 
<ommonly  known  as  '  stock  watering,'  or  the  capitalization  of  surplus  earnings,  the 
most  usual  form  of  which  is  accomplished  by  charging  high  rates  of  freight  and  ac- 
eumulating  a  large  surplus  fund,  putting  it  into  improvements  and  then  issuing  stock 
to  represent  the  value  of  these  improvements;  or,  in  other  words,  exacting  numey 
from  the  public,  and  then  forever  after  making  the  public  pay  interest  on  the  money 
so  exacted.  It  is  argued  by  the  a])ologi8ts  for  these  practices  that  it  is  current  among 
manufacturing  and  other  corjiorations,  but  they  ignore  these  essential  points:  that  a 
railroad  is  endowed  with  the  right  of  eminent  domain,  the  right  to  take  private  proj)- 
erty  because  it  is  for  public  use,  and  railroads  therefore  owe  some  duties  to  the  public 
which  manufacturing  companies  do  not.  Again,  manufacturing  corporations  are  not 
like  railroads,  natural  mono])olies  by  the  very  nature  of  their  construction,  and  no  one 
is  obliged  to  i)atronize  them,  as  is  the  case  with  the  railroads.  We  cannot  better  illus- 
trate the  practical  operation  of  this  abuse  than  by  comparing  the  management  of  the 
'  Baltimore  and  Ohio '  and  the  'New  York  Central  and  Hudson  River'  railroads.  Both 
of  these  are  trunk  lines,  connecting  the  interior  with  the  seaboard  and  operating  nearly 
the  same  extent  of  road.  The  policy  of  the  former  company  has  been  to  invest  its 
sur|)lus  earnings  in  the  imjirovemeut  of  its  road,  and  carrying  forward  their  cost  upon 
their  books  as  a  snrjdus,  while  that  of  the  latter  eomi)any  has  been  to  make  the  same 
investment  of  earnings,  but  to  issue  stock  representing  the  same. 

"This  plan  appears  to  have  been  initiated  with  the  formation  of  the  New  York  Cen- 
tral Railroad  in  1853,  by  the  consolidation  of  the  ten  separate  corporations  owning  the 
route  between  the  Hudson  River  and  the  Lakes.  The  combined  amount  of  share  cap- 
ital and  convertible  bonds  of  these  separate  organizations  was  then  $2'A,2',if>,0()0,  but  a 
considerable  portion  of  the  share  capital  had  not  been  paid  in.  The  e<iualizing  process 
of  the  consolidation  was  that  the  Schenectady  and  Troy  Company — that  being  the  least 
productive  of  all — should  come  in  at  par,  while  the  holders  of  stock  or  convertible 
bonds  of  the  other  roads  received  a  premium  in  consolidated  6  per  cent,  debt  certifi- 
cates ranging  from  17  to  55  per  cent.,  making  an  issue  of  these  certificates  amounting 
to  $8,894,500,  or  over  30  per  cent,  on  the  true  share  capital  of  the  company.  From  this 
time  down  to  1867  there  had  been  no  material  change  in  the  total  of  stock  and  debt  of 
the  New  York  Central  Company  other  than  what  could  be  nearly  accounted  for  by 
actual  value  received,  and  its  capital  account  was  then  represented  by  $28,537,000  of 
stock  and  ^12,069,820  of  bonds,  a  total  (including  the  'water'  of  1853)  of . $40, (506, 820. 
The  Hudson  River  Railroad  Company  at  the  same  time  had  a  share  capital  of  $7,000,000 
and  a  bonJed  debt  of  $7,227,000;  total,  $14,227,000;  making  these  two  companies, 
which  in  1860  were  consolidated,  stand  in  1867  as  followS :  Stock,  $35,537,000,  and 
bonds,  $19,296,820,  or  a  total  capital  account  of  $54,833,820. 

"During  1867  the  Hudstm  River  Company  presented  its  stockholders  with  $3,500,000 
stock,  or  a  dividend  of  50  per  cent. ;  and  again,  at  the  time  of  consolidation,  another 
one  of  85  per  cent,  on  the  then  outstanding  stock  of  $16,000,000,  making  an  issue  of 
$13,625,000.  The  New  York  Central  Company  had,  in  1868,  presented  its  stockholders 
with  $23,036,000,  or  80  per  cent.,  followed  by  one  of  27  per  cent.,  $7,775,000,  at  the 
time  of  consolidation.  Thus  in  the  space  of  two  years  the  now  New  York  Central  and 
Hudson  River  Railroad  Ccmipany  added  to  its  capital  the  sum  of  $47,936,000,  created 
out  of  nothing  but  the  will  of  its  directors  and  the  mixture  of  paper  and  printers'  ink. 
From  1870  to  1872  the  bonded  debt  was  increased  each  year  by  from  one  to  two  millions 
of  dollars,  since  which  it  has  been  increased  some  $20,000,000  for  purposes  of  construc- 
tion. Who  shall  say  if  any,  or  how  nuich,  of  this  has  been  additional  '  water'  to  make 
up  the  necessary  amount  of  $7,200,000  for  annual  dividends  ?    It  will  be  seen  by  the 


foregoing  that  the  known  fictitious  capital  of  this  company,  including  the  issue  of  1853, 
is  some  $10,000,000  greater  than  the  real  capital  which  had  been  invested  down  to  1869. 

''  In  the  one  case  the  liabilities  re])resent  about  $40,000  per  mile  of  road,  and  in  the 
other  about  $130,000.  Both  pay  about  the  same  dividends,  and  it  certainly  requires 
no  mathematical  ability  to  comprehend  the  fact  that,  in  order  to  do  this,  the  latter 
road  must  on  the  same  traffic  charge  the  public  a  much  higher  rate  of  transportation. 
The  roa<ls  mentioned  have  been  selected  only  because  they  are  conspicuous  exainples, 
and  to  our  shame  be  it  said,  that  aside  from  the  Baltimore  and  Ohio  there  is  not 
another  trunk  line  of  railroad  in  the  United  States  to  hold  up  as  an  example  of  honest 
railroa<l  management.  The  entire  railroad  system  of  the  United  States  is  tainted  with 
the  same  practice,  and  it  is  estimated  that  about  one-half  of  the  stock  of  the  entire 
body  of  railways  in  this  country  has  been  thus  manufactured.  There  are  other  abuses 
connected  with  the  management  of  railroads,  such  as  fast-freight  lines  run  by  outside 
companies,  the  stock  of  which  pays  enormously,  and  is  owned  by  their  directors, 
superintendents,  and  other  employi^s.  These  fast-freight  lines  now  do  much  of  the 
business  of  the  country,  and  although  within  the  past  few  years  many  of  them  have, 
in  deference  to  public  opinion,  been  changed  from  the  non-co-operative  to  the  co- 
operative system,  yet  those  of  the  old  style  which  remain  are  gradually  sapping  the 
life  of  the  railroads  over  which  they  run.  They  should  be  driven  out  in  every  case, 
and  their  business  should  be  done  exclusively  by  the  railroads  themselves.  The  palace 
and  sleeping-car  and  express  companies  are  another  excrescence  upon  the  railroad  sys- 
tem of  the  country ;  and  from  the  fact  that  they  now  own  from  ten  to  twenty  million 
dollars'  worth  of  cars,  bought  mostly  from  profits,  they  should  be  bought  out  by  the 
railroad  companies,  so  that  the  profits  would  go  to  swell  their  general  revenues. 
Many  railroad  managers,  superintendents,  and  other  officers,  are  interested  in  coal 
mines,  saw-mills,  farms,  and  manufacturing  establishments,  and  give  themselves  lower 
rates  when  other  people  are  paying  higher  rates  for  the  same  accommodation.  These 
gentlemen  and  the  master  mechanics  are  frequently  interested  in  patent  boxes,  patent 
lubricators,  patent  ventilators,  i)atent  brakes,  and  patent  fastenings,  and  are  thereby 
induced  to  use  their  own  when  they  could  get  cheaper  and  better  ones  with  advantage 
to  the  roads  and  their  stockholders.  Their  road-masters  are  interested  in  patent  frogs 
and  crossings,  patent  joints,  and  patent  track-tools.  General  freight  agents  are  inter- 
ested in  equipment  companies  and  fast  freight  lines,  and  make  money  by  giving 
rebates,  drawbacks,  and  si)ecial  rates,  or  by  furnishing  cars  to  shippers  who  will  pay 
a  bonus  and  denying  them  to  such  who  will  not,  or  do  not,  know  the  ropes.  Passen- 
ger agents  share  the  spoils  of  the  '  scalpers.'  Purchasing  agents  exact  and  pocket  com- 
missions on  all  the  sui>plies  and  materials  purchased  and  used  in  the  various  depar^ 
ments.  Paymasters  have  been  known  to  levy  a  tax  upon  all  orders  accepted  and  paid 
by  them. 

"And,  in  addition  to  all  this,  lavish  and  extravagant  ex])enditure  by  the  managers 
has  been  the  rule  rather  than  the  excei)tion.  The  money  paid  by  the  public  for  trans- 
portation, instead  of  being  carefully  husbanded  and  applied  to  the  payment  of  the 
proper  dividends  to  stockholders,  has  been  used  to  influence  legislation,  and  much  of 
the  corruption  among  men  in  public  life  may  be  traced  directly  to  this  source.  The 
history  of  the  Credit  Mobiler  is  yet  fresh  in  our  minds,  and  in  the  report  of  a  committee 
appointed  by  the  legislature  of  the  State  of  New  York,  in  1872,  to  investigate  the  affairs 
of  the  Erie  Railroad,  we  find  the  following :  *  It  is  furlher  in  evidence  that  it  has  been 
the  custom  of  the  managers  of  the  Erie  Railway,  from  year  to  year  in  the  past,  to  spend 
large  sums  to  control  elections  and  to  influence  legislation.  In  the  year  1868  more 
than  $1,000,000  was  disbursed  from  the  treasury  for  '  extra  and  legal  services.'  For 
interesting  items  see  Mr.  Watson's  testimony,  pages  33ii  and  337. 

"Mr.  Gould,  when  last  on  the  stand  and  exaudued  in  relation  to  various  vouchers 
shown  him,  admitted  the  payment,  during  the  three  years  prior  to  1872,  of  large  sums 
to  Barber,  Tweed,  and  others,  and  to  influence  legislation  or  elections;  these  amounts 
were  charged  in  the  '  India-rubber  account.'  The  memory  of  this  witness  was  very 
defective  as  to  details,  and  he  could  only  remember  large  transactions ;  but  could 
distinctly  recall  that  he  had  l)een  in  the  habit  of  sending  money  into  the  numerous 
districts  all  ov(^r  the  State,  either  to  control  nominations  or  elections  for  senators  and 
members  of  assembly.  Considered  that,  as  a  rule,  such  investments  paid  better  than 
to  wait  till  the  men  got  to  Albany,  and  added  the  significant  remark  when  asked  a 
question,  that  it  would  be  as  impossible  to  specify  the  numerous  instances,  as  it  would 
to  recall  to  mind  the  numerous  freight  cars  sent  over  the  Erie  road  from  day  to  day. 
(See  testimony,  p.  556.) 

"  It  is  fiot  reasonable  to  suppose  that  the  Erie  Railway  has  been  alone  in  the  cor- 
rupt use  of  monev  for  the  purposes  named  ;  but  the  sudden  revolution  in  the  direction  of 
this  company  has"^laid  bare  a  chapter  in  the  secret  history  of  railroad  management  such  as 
has  not  been'  permitted  before.  It  exposes  the  reckless  and  prodigal  use  of  money,  wrung 
from  the  people  to  purchase  the  election  of  the  people's  representatives,  and  to  bribe 
them  when  in  office.     According  to  Mr    Gould,  his  operations  extended  iutol.four  dif- 


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14 


APPENDIX. 


fereut  Stato.s.     It  was  bis  custom  to  contribute  mouoy  to  influence  botb  nominations 
and  electiouiJ.' 

"Tbe  foregoing  will  serve  to  indicate  tbe  defects  and  abuses  of  our  present  system 
of  railway  management,  althongb  tboae  we  bave  enumerated  are  bj'  no  means  all  of 
tbem.     We  may  now,  however,  properiy  proceed  to  consider  tbe  remedies. 

"Tbia  oi)ens  up  a  wide  range  of  discussion,  but  wo  propose  to  confine  ourselves  to 
those  remedies  which  experience  has  denu)nstrated  to  be  practicable.  State  regubi- 
tion  of  railways  by  making  laws  which  fix  rates  is,  as  a  whole,  impracticable;  the 
moment  you  attempt  to  regulate  the  details  of  railway  management  by  specific  enact- 
ments, that  moment  you  fill  the  statute-books  with  a  mass  of  laws  which  benefit  only 
the  members  of  the  legal  profession. 

''There  are,  however,  certain  general  laws  which  work  well  in  practice,  and  which 
every  State  should  enact  for  the  regulation  of  railroads  which  are  exclusively  within 
its  borders. 

**  Under  this  head  we  may  enumerate  the  following  : 

*' 1.  A  law  providing  a  board  of  railway  commissioners,  with  jiowers  similar  to 
those  possessed  by  the  railway  connnissioners  of  Massachusetts. 

'*2.  A  law  to  prevent  stock  inflations  similar  to  the  one  now  in  operation  in  Massa- 
chusetts. 

"3.  A  law  providing  for  the  publication  at  every  point  of  shipment  of  rates  and  fares, 
embracing  all  particulars  regarding  distance,  classifications,  and  rates,  which  should 
be  the  same  to  all  persons  under  similar  conditions,  and  prohiluting  the  increase  of 
such  rates  above  the  limit  named  in  the  publicaticm  without  giving  the  public  reason- 
able notice. 

*'4.  A  law  prohibiting  oflQcers  or  directors  of  railways  from  either  directly  or  in- 
directly owning  or  becoming  interested  in  any  non-co-operative  fast-freight  line  or 
car  company,  or  from  being  interested  in  any  manner  in  the  furnishing  of  supplies  to 
any  company  with  which  they  may  have  official  connection. 

"5.  A  law  ])rohibiting  railway  com])anies  from  acquiring  or  holding  more  real  estate 
than  is  necessary  for  the  operation  of  their  roads,  and  probihiting  railroad  comi>anie,-j 
or  otficers  of  companies  from  engaging  in  mining  or  any  business  other  thaii  thai; 
of  transi)ortation. 

"  6.  A  law  niaking  it  a  penal  offense  for  any  public  official  to  accept  or  use  the  free- 
pass  of  any  railway  company,  and  prohibiting  railway  companies  from  granting  such 
passes  to  any  but  regular  emi)loyes  of  such  railways. 

'*7.  A  laAv  proTiding  that  all  conunon  carriers  shall  receipt  for  quanfitt/,  whetheT 
it  be  of  grain  or  other  commodities,  and  to  deliver  the  same  at  its  destination. 

"8.  A  law  prohibiting  represent  a  tivcM  of  the  people  who  belong  to  the  legal  pro- 
fession from  iM'ing  retained  on  either  side  in  cases  where  the  public  interest  is  involved. 
"  Of  these  all  but  the  first  should  also  be  national  laws,  and  in  addition  Congress 
should  also  provide  a  dejiartment  or  bureau  of  commerce,  for  the  j»urpose  of  obtain- 
ing and  preserving  statistics  relating  to  our  internal  commerce,  to  the  end  that  intel- 
ligent conclusions  may  be  arrived  at  in  matters  pertaining  to  this  great  interest.. 
There  is  no  one  thing  that  strikes  the  student  of  the  tran8i)ortation  problem  so  forcibly- 
as  the  amazing  carelessness  and  neglect  that  has  left  a  connnerce  so  great  without 
the  ordinary  facilities  for  obtaining  even  a  correct  idea  of  its  extent.  The  total  of  th« 
exports  an<l  imports  constitutiug  the  foreign  commerce  of  the  United  States  for  the 
year  1873  were  under  five  hundred  millions  of  dollars,  while  it  is  estimated  that  thti 
value  of  products  transported  on  all  the  railways  of  the  Unite<l  States  for  the  sanus 
period  w  as  upward  of  ten  thousand  millions.  The  commerce  of  the  Ohio  River  was 
estimated  at  sixteen  hundred  millions  ten  years  ago,  and  at  this  rate  the  entire  do- 
mestic connnerce  of  the  country  would  at  this  time  probably  not  be  less  than  fifteen 
thou.sand  millions  of  doll3i*s." 

That  such  an  enormous  connnerce  as  tbis  is  worth  attention,  and  that  the  abusew 
enumerated  require  regulaticm  in  the  interest  of  the  public,  no  one  can  deny.  That 
the  various  States  possess  the  poAver  to  regulate  the  roads  exclusively  within  their 
respective  borders,  and  that  Congress  also  has  the  power  over  inter-State  ccuixu-ations, 
is  generally  conceded.  These  powers  were  specifically  defined  by  the  United  Stateb 
Senate  Connnittee  on  Transportation  Routes  as  follows : 

"First.  That  the  powers  of  Congress  whatever  they  may  be,  are  derived  directly 
from  the  peojde  of  the  .several  States,  and  not  from  the  States  themselves. 


a 


Second.  That  every  important  word  in  the  clauses  which  confer  the  'power  to 
regulate  c(nnmerce  among  the  several  States,'  and  to  'make  all  laws  which  shall  be 
necessary  for  carrying  it  into  execution,'  has  received  legislative,  executive,  and  judicial 
construction,  and  under  such  construction  the  power  of  Congress  to  regulate  inter- 
State  transportation  by  railroads,  and  to  aid  and  facilitate  commerce,  is  clearly  estab- 
lished. 

"Third.  That  in  the  exercise  of  this  power  Congress  is  authorized,  under  the  grant 
of  auxiliary  power,  to  employ  such  means  as  are  appropriate  and  plainly  adapted  to 
their  execution. 


REPORTS    OF    EXPERTS. 


15 


"Fourth.  That  in  the  selection  of  means  by  which  inter-State  commerce  shall  bo 
regulated.  Congress  may — 

"1.  Prescribe  the  rules  by  which  the  instruments,  vehicles,  and  agents  engaged  in 
transporting  commodities  from  one  State  into  or  through  another  shall  be  governed, 
whether  such  transportation  is  by  land  or  water. 

"2.  That  it  may  appropriate  money  for  the  consfruction  of  railways  or  canals,  when 
the  same  shall  be  necessary  for  the  regulation  of  commerce. 

"3.  That  it  may  incorporate  a  company  with  authority  to  construct  them. 

"4.  That  it  may  exercise  the  right  of  eminent  domain  within  a  State  in  order  to 
provide  for  the  construction  of  such  railways  and  canals]"or, 

"5.  It  may,  in  the  exercise  of  the  right  of  eminent  domain,  take  for  the  public  use, 
paying  just  compensation  therefor,  any  existing  railway  or  canal  owned  by  jirivate^ 
persons  or  cor]>orations." 

And  these  opinions  have  since  been  substantially  confirmed  by  the  decisions  of  the 
United  States  Sui>reme  Court  in  the  "granger  cases."  In  view  of  these  broad  princi- 
plesof  equity,  so  authoritatively  defined,  it  is,  perhai)S,  not  toonnichtohope  foragradual 
elimination  of  the  abuses  in  our  transportation  system  which  have  so  long  been  a  bur- 
den upon  the  industries  of  the  people. 

Statement  prepared  by  Mr.  Thnrher,  in  reply  to  an  inquiry  touching  the  influence  of  capital 
upon  the  course  of  trade,  and  the  rdative  power  of  capital  and  of  the  economies  of  trans- 
portation upon  prices  and  upon  the  course  of  trade. 

Sir:  In  answer  to  your  supplementary  question  in  regard  to  ''the  influence  of  capi- 
tal upon  the  course  of  trade,"  and  in  which  you  recjuest  an  expression  of  my  view* 
upon  "the  ]>ersistent  power  of  the  capital  of  New  York  City  toward  maintaining  her 
commercial  supremacy,"  I  would  say  that  it  is  manifestly  imi)08sible  to  condense 
within  a  few  pages  a  satisfactory  answer  to  a  question  which  opens  up  .more  or  less 
directly  a  wide  range  of  politico-economic  questions,  but  I  may  sunnnarize  them  as 
follows:  First,  while  capital  undoubtedly  does  exercise  a  considerable  influence  as 
hereinafter  sl^own,  it  is  entirely  .subordinate  and  secondary  to  other  essential  condi- 
tions. Great  connnercial  cities  are  dependent  upon  geographical  position,  upon  cli- 
mate, upon  harbors,  upon  acces.sibility  to  the  .sources  of  supply  of  the  products  which 
make  connnerce,  and  in  later  years,  perhaps  more  than  all,  are  de])endent  upon  trans- 
portation facilities  which  are"  nu)st  potent  in  attracting  or  repelling  connnerce.  Of 
course  capital  has  much  to  do  with  providing  tran.sportation  facilities;  and  ca])it*il 
controlling  the  jiower  of  steam  has  done  much  to  change  the  channels  of  trade  which 
hall  or  CAen  a  qnarter  of  a  century  since  were  thought  to  be  fixed  and  innnovable. 
It  is  in  this  direction,  perhaps,  that  the  power  of  capital  in  controlling  trade  is  most 
noticeable.  Englislrcapital  invested  in  .steamships  has  reached  out  to  the  four  (luarters. 
of  the  globe,  attracting  the  connnerce  of  the  world  to  English  markets.  In  this  coun- 
try the  capital  of  the  seaboard  States,  and  to  a  considera])le  extent  that  of  Europe, 
invested  in  railroads,  has  carried  the  productions  and  sui>plies  of  the  great  West  over 
mountains  and  rivers  along  our  paraUels  of  latitude,  when  it  would  seem  l>y  all  the 
natural  laws  of  trade  they  Avould  have  sought  the  .seaboard  by  means  of  the  great 
rivers  which  iienetratetbe'country  longitudinally ;  and  capital  embodied  in  the  labor- 
saving,  wealth-creating,  wonderful  steam-engine  has  revolutionized  the  entire  com- 
mercial, jxditical,  and  .social  organization  of  the  world.  Bnt  this  ])ower  has  become 
.so  widely  diflused,  and  is  so  generally  used  by  all  the  great  commercial  cities,  that  it 
may  be  said  the  greater  cai)ital  which  New  York  controls  does  not,  in  the  way  of 
transportation  facilities,  give  her  any  advantage.  Indeed,  as  regards  railroads,  she 
may  be  said  to  be  at  a  disadvantage,  for  her  railroads  are  controlled  by  peisons  who 
selfishly  (and  I  believe  shortsightedly)  operate  them  without  regard  to  the  commercial 
interests  of  New  York,  and  thus  abrogate,  to  a  considerable  extent,  thy  advantage 
which  New  York  has  long  enjoyed  of  having  during  .seven  months  of  the  year  Avater 
trans^portation  Avhich  has,  jirobably  more  than  anything  else,  contributed  to  her 
commercial  supremacy.  There  can  probably  be  no  moie  striking  exanqde  of  the 
poAver  of  capital  iuA-ested  in  tran.sportation  than  Avhat  has  been  accomplished  hy 
the  few  millions  which  the  people  of  the  State  of  New  York  Avi.sely  invested  in 
the  Erie  Canal,  lint  I  have  perbajjs  said  enough  ui)on  the  i>oAver  of  capital  in- 
vested in  transjjortation  facilities  controlling  trade,  and  Avill  uoav  proceed  to  con- 
sider how  far  the  influence  of  capital  controls  trade  at  certain  centers  and  upon 
certain  lines  by  capitaliziny  commodities  in  movement.  In  your  connnunication  you  say : 
"I  have  seen  it  stated  that  the  capacity  of  capitalizing  commodities  in  movement  by 
drawing  again.st  a  fixed  time  in  transit  and  deliA'ery,  upon  the  basis  of  the  value  of 
the  commodity,  exercLses  a  .strouger  influence  oA^er  prices  and  over  the  cour.se  of  trade 
than  does  the  economy  of  transportation."  So  far  as  the  influ(»nce  over  prices  is  con- 
oemed,  this  may  be  correct.  If  there  be  not  suflicient  cajntal  to  moA-e  the  commodities 
produced,  they  naturally  decline  in  value,  or,  in  other  Avord.s,  more  Avould  have  to  be 
given  for  a  dollar  than  if  ^the  supply  of  capital  was  in  larger  ijroportion  to  the  supply 


16 


APPENDIX. 


of  commodities  to  be  moved.  This  tnitli  is  doubtless  at  the  root  of  the  popular  demand 
HI  many  parts  of  tlie  country  for  more  currency,  but  when  we  consider  how  infinitesi- 
nial  IS  the  proportion  of  the  exchanges  effected  by  the  gold,  silver,  and  paper  currency 
of  the  country  as  compared  with  checks  and  bills  of  exchange,  the  importance  of  this 
issue  sinks  out^of  sight,  and  I  cannot  l>ut  conclude  that  it  has  assumed  undue  impor- 
tance among  the  public  questions  of  the  day.  How  large  the  exchanges  effected  bv 
other  mediums  than  the  paper  and  metallic  money  of  the  country  it  i^  impossible  to 
say  or  even  to  estimate  but  we  may  catch  a  glimpse  of  its  immensity  in  the  transac- 
I^^V/  ?!*"  New  York  Clearing  House  (which,  as  is  well  known,  is  a  contrivance  i^ 

vP^?nf'iii~  i^i'te^^  ^'^''^  ^V^^l  with  each  other),  and  which  were  during  the 

year  of  187/  $24,663,240,003,  nearly  all  of  which  was  in  the  form  of  checks  and  drafts, 
and  It  18  n(^  perhans  too  much  to  say  that  all  the  currency  in  the  United  States  could 
not  have  effected  these  exchanges  which  were  so  quietly  and  easily  done  by  these  bits 
ofpaper.  The  idea  has  gained  a  wide  circulation  that  bank  capital  is  employed  in 
grinding  the  face  of  the  poor  and  cheating  the  producer  out  of  the  proceeds  of  his  labor, 
but  I  think  a  careful  examination  will  show  that  the  efforts  of  railroads  to  earn  inter- 
est and  dividends  upon  their  watered  securities  by  charging  exorbitant  rates  of 
freight  IS  a  greater  burden  upon  all  classes  of  citizens  than  the  interest  paid  by  bor- 
rowers upon  the  capital  borrowed.  In  the  latter  case,  at  least,  the  bonower  pay's  only 
npon  what  he  receives,  and  he  has  the  opti(ui  of  whether  he  will  borrow  or  not ;  in  the 
lormer,  the  public  are  obliged  to  use  the  accommodation  furnished  by  the  railroads  and 
to  pay  the  amount  demanded  for  the  service. 

I  cannot  better  illustrate  the  services  performed  by  bank  capital  than  by  quoting 
the  words  of  Professor  Sumner,  whosaysthat  "  banking  capital  renders  very  important 
jer>'ices  in  that  it  throws  the  burden  of  waiting  between  producer  and  consumer  on 
the  idle  capital  of  the  country  and  releases  the  capital  engaged  in  production  so  that 
It  can  be  at  once  re-employed.  Modern  commerce  cannot  be  carried  on  without  bank- 
ing tacihties ;  they  are  part  of  the  modern  system.  The  economy  is  obvious  and  enoi- 
mous,  banking  capital  making  commerce  move  many  times  more  rapidly  than  it  could 
without  banks." 

I  might  pursue  this  branch  of  the  subject  into  commercial  credits,  which  still  further 
increase  the  tacilities  of  exchange.  They  are  of  course  founde«l  on  capital,  but  depend 
largely  on  other  considerations,  and  can  be  amplified  many  times  beyond  the  amount 
of  the  capital  upon  which  the  credits  are  based;  but  to  return  to  the  proposition  'Hhat 
the  ca]>acity  to  capitalize  ccmimodities  in  movement  exercises  a  stron^tT  influence 
over  the  course  of  trade  than  does  the  economy  of  transportation,"  I  must  say  that  [ 
do  not  think  it  is  borne  out  by  the  facts.  The  reasons  for  this  are  given  so  concisely 
and  forcibly  in  a  paper  by  Mr.  A.  E.  Oir,  a  merchant  of  this  city,  that  I  quote  themak 
an  expression  of  my  own  views,  as  follows: 

/*  The  proposition  that  the  persistent  power  of  the  capital  of  the  city  of  New  Yorl- 
wiU  maintain  her  commercial  supremacy  is,  in  my  opinion,  a  fallacy,  'and  one  which 
If  persisted  in  as  being  the  major  element  in  maintaining  supremacy  will  in  time  surely 
rob  New  |ork  of  her  legitimate  commercial  birthright,  because  in  holding  this  delu- 
sion closely  in  view  she  will  continue  blind  to  those  influences  which  in  the  past  few 
years  have  been  so  busy  and  of  late  so  terribly  energetic  in  competing  with  her  for  a, 
large  part  of  her  foreign  and  domestic  commerce. 

"It  is  said  the  ostrich  when  closely  pursued  by  its  pursuers  will  bury  its  head  in 
the  sand,  and  in  this  position  imagine  itself  safe  from  harm.  New  York  is  not  alto- 
gether tree  from  the  responsibility  of  having  practised  the  foolish  confidence  of  the 
ostrich  W  hile  Canada  has  been  actively  enlarging  the  Welland  Canal,  Boston  boring 
through  the  Hoosac  Mountains,  Philadelphia  and  Baltimore  opening  up  new  paths  to 
the  granaries  of  tlie  great  West,  whilst  even  sleepy  New  Orleans  has  been  deepening 
the  delta  of  the  Mississippi  and  awakening  to  the  importance  of  attracting  to  herself 
the  commerce  of  those  States  bordering  on  her  great  river  and  its  tributaries.  New  York 
has  done  little  else  to  retain  her  commercial  acquisitions  than  study  the  records  of  the 
past,  and  when  cautioned  against  the  aggressive  action  of  her  seaboard  sisters,  noint 
to  her  bank  balances  and  laugh  at  their  attacks. 

*'I  do  not  wish  you  to  suppose  that  I  fail  to  appreciate  the  importance  of  capital  in 
relation  to  the  course  of  trade.  It  is  a  very  necessary  auxiliary,  and  in  a  country 
where  comparative  poverty  is  the  rule  and  means  of  transit  limited  and  defective  its 
sway  may  be  all  important  to  control  and  dictate.  But  in  a  country  like  the  United 
States,  where  wealth  is  diffusive,  where  mercantile  productions  are 'almost  limitless 
where  means  of  transportation  are  su])erior  to  those  of  any  country  in  the  world  and 
constantly  increasing,  and  whose  surplus  productions  are  sought  at  her  own  seaboard 
by  almost  every  civilized  market,  capital  is  not  the  controlling  element  that  will  local- 
ize commerce,  but  on  the  contrary  the  place  that  will  present  the  most  remunerative 
trading  will  be  sought  by  capital. 

"  New  York  W!is  not  always  the  financial  center  of  the  United  States.     In  the  early 
days  of  Amencan  commerce,  when  she  could  only  count  her  wealth  by  thousands 
other  cities  could  point  to  theirs  in  tens  of  thousands.     It  was  not  until  a  producing 


REPORTS    OF    EXPERTS. 


17 


country  became  her  tributary  through  the  means  of  cheap  transit  facilities  that  New 
York  began  to  assert  her  financial  Jind  coiumercial  ascendancy.  Then  it  was  that  the 
surplus  of  our  home  products  sought  her  in  trade,  because  they  <;ould  l»e  jdaced  here 
cliea])er  than  at  any  other  market  on  the  coast,  an(|  then  it  was  that  the  products  of 
the  foreign  looms  were  landed  at  her  wharves,  because  they  could  be  marketed  in  the 
interior  to  better  advantage  than  by  the  more  expensive  routes  offered  by  ot\utr  sea- 
board cities,  and  be(;ause  (and  tins  is  a  very  impoitaut  item  in  the  calculation)  tlir 
vessel  whirh  brought  the  foreign  luxuries  or  ne(;essaries  was  assured  of  a  return  cargo 
of  lioine-grown  surplus  producticui  by  c(uning  to  her'port.  If  the  Erie  Canal  ha<l  ter- 
minated at  Boston  instead  of  at  New  York,  which  city  to-day  would  have,  been  the  re- 
roguized  ciuumercial  nu'tropolis  of  the  United  States  f  If  capital  can  luaiutaiii  <-om- 
mercial  supremju;y,  from  wlience  did  New  York  obtain  her  commenre  and  her  ca|»ital  f 
I  do  not  know,  Init  if  the  query  is  ]nit  in  the  negative  the  answer  is  very  plain.  She 
first  secured  transit  facilities  with  the  interior  superior  to  those  of  any  eonipeliiig  point, 
then  the  suri>lus  j>roduetionof  the  country  sought  her  as  a  market,  and  then  the  trade 
that  she  had  to  otter  the  capitalist  attracted  to  her  his  capital. 

"Let  me  giv«'  you  a  juactical  illustration  of  this  law  of  trade  which  came  to  my 
notice  only  a  few  days  ago.  Two  hundred  thousand  bushels  of  corn  in  Chicngo  was 
seeking  a  market  at  the  seabo.ard.  The  ((uestion  ('(mtrolling  its  destinati(ui  was  not 
the  financial  strength  of  the  city  to  be  selected,  but  which  market  on  flu*  Atlantic 
coast  would  yield  the  largest  return  to  the  ship]»er.  An  M]»p1ieation  cam<*  to  a  linn  in 
New  York  in  tlies<?  words  'Will  you  advame  on  two  hundred  tluuisand  buslu'ls  of 
iforn  to  be  shi]q)ed  to  Baltimore?'  They  answered,  'jYes;  but  why  to  Baltimore  in 
jNn'ference  to  New  York?'  The  reply  came,  'Transportation  to  Baltimore  is  half  e«'nt 
]>er  bushel  less  than  to  New  York.'  And  so  the  corn  went  to  Baltimore;  and  just  so 
much  was  adde<l  to  her  <'(Minnercial  strength  by  N«'w  York  japif.al.  This  corn  was  not 
controlled  by  ea|»ital,  it  could  select  its  own  market,  and  having  sele<t<'d  Baltimore, 
because  the  sum  of  one  thousand  dollars  could  be  sav«Ml  in  tians]>ortatioii  eharges. 
New  York  capital  followed  it  there  for  the  reason  that  it  was  idle  and  Baltimore  ottered 
it  employment. 

"Follow  this  transaction  a  little  further.  Six  vessels  will  find  in  Baltimore  six 
cargoes  of  c<un  awaiting  them;  and  she  will  rec<nve  the  inward  cargoes  of  those  six 
vessels  ]>ecause  she  can  supply  them  with  return  freights.  Now  what  think  you? 
Was  it  BaltiuKue's  chea]M'r  transpoitation  charges,  as  against  competing  points,  or 
New  York's  idle  eapital  tliat  procured  for  the  former  all  the  advantages  arising  out  of 
this  corn  shi})iu«'nt  f 

"Having  shown  that  capital  is  im]>otent  to  attract  trade  wlu'u  opposed  l»y  the 
magnet  of  cheaper  trans])ortation,  let  me  first  point  out  as  nearly  as  ]>ossible  the 
mciasuie  of  loss  which  New  York  sustained  in  this  single  transaction,  and  then  suggest 
the  remedy. 

"If  the  corn  in  (|uestion  had  come  to  New  York  at  the  same  rate  of  transj>orfation 
as  charged  to  Baltimore,  six  and  a  half  cents  ]>er  bushel  (including  the  terminal 
charges  in  New  York),  or  thirteen  thousand  dollars  would  have  been  flu?  a<;tual  amount 
<*ontributed  for  transportation  within  the  borders  of  our  State.  Of  this  amount  tlu' 
State  of  New  Y(uk  would  have  received  fVu-  tolls  I'i.OOO,  and  the  industrial  poilion  of 
the  ]»opulation  f^l  1,000.  These  figures  only  represent  the  measure  of  the  ]M>sitive 
known  loss.  The  loss  arising  from  the  non-arrival  of  the  six  vess«*ls  at  our  ]unt  with 
their  incoming  cargoes,  the  handling  and  storing  of  these  cargoes,  and  their  final  sale 
and  transportation  in  great  nuiasure  into  the  interior  can  only  be  matter  of  conjecture, 
but  must  also  be  taken  into  the  estimate  of  the  total  loss  sustained.  Nor  is  this  all.  Bal- 
timore having  demonstrated  the  fact  that  she  can  give  r«;turn  cargoes  to  these  six  ves- 
sels, will  imluce  a  return  on  their  part  to  her  i)<»rt  with  six  additional  companions,  to 
the  continued  detriment  of  the  foreign  commerce  of  New  York. 

"It  has  been  shown  that  one-half  cent  per  bushel  or  tin;  sum  of  11,000  turne«l  this 
com  from  New  York  to  Baltimore.  It  is  also  shown  that  the  tax  that  would  have 
been  claimed  l>y  the  State  of  New  York,  if  this  corn  had  passed  through  her  canals, 
was  $'2,000.  It  is  therefore  evident  that  it  was  the  toll  charge  made  by  the  State  that 
turned  the  corn  from  New  York  to  Baltimore,  and  that  through  that  <lemand,  not  only 
did  the  State  fail  to  receive  any  toll  whatever,  but  the  industrial  classes  of  the  State 
failed  to  receive  the  sum  of  $11,000,  which  otherwise  would  have  come  into  their  pos- 
session. 

"  In  1870  the  toll  charge  of  the  State  was  reduced  to  three  cents  per  bushel ;  in  1875 
it  was  reduced  to  two  cents  per  bushel ;  in  1877  to  one  cent.  Why  *  Because  western 
productions  were  seeking  other  routes  to  the  seaboard  which  were  cheaper  than  by 
the  Erie  Canal.  This  toll  charge  stimulate«l  the  constru<;tiou  of  these  routes  just  as 
unhealthy  ]>rotection,  by  means  of  large  tariff'  duties,  stimulates  over  production  of 
home  manufactures.  If  a  liberal  policy  had  been  extended  to  the  city  and  State  by 
making  the  canals  free,  these  competitive  routes  would  nt  ver  have  been  constructed  ; 
and  New  York  to-day  would  undoubtedly  be,  as  she  yet  claims  to  be,  the  commercial 
metropolis  of  the  United  States  f 

2  I  C 


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18 


APPENDIX. 


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of  tl.c  taxe,  coUectea  f„r  the  i"pp™t  ofthe  Se  ?         ■'^'  ""'^"^"*'-'  '"•""'  «"">  ''alf 
;!  L^'"  ?"*  *"''  >■<""'  ♦•■>«'  with  <liscus.siiijt  this  subject. 

Of  tine  quality,  requiring,  tee  ^apit^^^^^ 

more  liberal  terms  ami  tlius  rndn^fa    arVr  p^rom    e     tU  l ''  ^^««  '^^^^  *«  ^''^'^ 

=^i;\^;;,n;^:^;--re;'c£r"-'^-'«-"-^^ 

hv^New  Yo,r't'!nnn^  to  a  considerable  extent,  nentralized  the  advanta^^es  enioyed 


i 


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GAYLAMOUNT 
PAMPHLET  UNDER 

Mmitmfmdimnd  htt 

:eAYLORD  BROS.  Imc 

SyracuB*,  N.  Y. 

Stodiften,  CM. 


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